ACIT, BARMER V. Chohatan Construction Co., BARMER

ITA 237/JODH/2013

• Counselvise Citation: 23723314 RSA 2013
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-09-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 17-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Rejection of books of accounts; Depreciation
• Section: 145

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 237/JODH/2013 (A.Y. 2009-10) ACIT, VS. CHOHATAN CONSTRUCTION CO., CIRCLE, BARMER. VPO CHOHTAN, BARMER. PAN NO. AAAFC7974M ASSESSEE BY : SHRI RAJENDRA JAIN DEPARTMENT BY : SHRI N.A. JOSHI- D.R. DATE OF HEARING : 16/09/2013. DATE OF PRONOUNCEMENT : 18/09/2013. O R D E R PER N.K.SAINI, A.M THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 31/01/2013 OF LD. CIT (A), JODHPUR. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. REDUCING THE GP RATE OF 11% AGAINST THE GP RATE OF 12% APPLIED BY AO AFTER REJECTION OF BOOKS OF ACCOUNTS AND CIT(A) HAS UPHELD THE REJECTION OF BOOKS OF ACCOUNTS. 2. DELETING THE TRADING ADDITION RS. 25,06,842/- MA DE BY AO, IGNORING THE FACT THAT ESTIMATION OF THE GP RATE WAS MADE BY AO FOR THE 2 DEFECTS FOUND IN THE BOOKS OF ACCOUNT AND CONSIDERI NG THE PAST HISTORY OF THE CASE. 2 FROM THE ABOVE GROUNDS, IT IS CRYSTAL CLEAR THAT T HE ONLY GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF TRADING ADDITION AMOUNTING TO RS. 25,06,842/-. 3. THE FACTS OF THIS CASE IN BRIEF ARE THAT ASSESSEE FILED E-RETURN OF INCOME ON 30/09/2009 DECLARING TOTAL INCOME AT RS. 1,13,62,088/-, WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE I.T . ACT, 1961 (HEREINAFTER REFERRED TO AS ACT, FOR SHORT) ON 26 /03/2011. LATER ON, CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED THE FOLLOWING CHART FOR GROSS PROFIT (GP) AND NET PROFIT (NP) OF LAST THREE YEARS:- A.Y. GROSS RECEIPTS DECLARED GROSS PROFIT (%) DECLARED NET PROFIT (%) 2007 - 08 165299628.00 1,98,33,955.00 12.00% 4.22% 2008 - 09 100782725.00 10078272.00 626609.00 10.00% 0.62% 2009 - 10 250683952.00 27575235.00 11362088.00 11% 4.47% 4. THE ASSESSING OFFICER POINTED OUT THAT THE ASSESSE E HAD DEBITED RS. 22,31,08,717/- AS WORK EXPENSES, DETAILS OF SUC H EXPENSES WERE FILED. HOWEVER, THE BOOKS OF ACCOUNTS OF THE ASSESS EE CONTAINED 3 SEVERAL DEFECTS AND WERE NOT MAINTAINED PROPERLY. THE MAJOR DEFECTS POINTED OUT BY THE ASSESSING OFFICER WERE FOLLOWING :- 1. THE ASSESSEE HAS NOT MAINTAINED ANY STOCK REGIST ER FOR MATERIAL CONSUMED ON DAY-TO-DAY BASIS. 2. IN RESPECT OF CONTRACT LABOUR EXPENSES, CAMP & S ITE EXPENSES, MESS EXPENSES, MACHINERY REPAIRING EXPENS ES, GENERAL EXPENSES, OFFICE EXPENSES, TYRE EXPENSES ET C. AND THESE EXPENSES ARE NOT PROPERLY VOUCHED. 3. THE ASSESSEE HAS NOT MAINTAINED DETAILS OF EXPEN SES SITE WISE AND WORK WISE. 4. NO REGISTERS FOR ATTENDANCE FOR WORKERS IS MAINT AINED AND LOGBOOKS OF VEHICLES IS NOT MAINTAINED. 5. THE VOUCHERS ARE MOSTLY SELF-MADE VOUCHERS ONLY. 6. THE ASSESSEE HAS DEBITED RS. 97,311/- AS DONATIO N EXPENSES. 5 . THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOU NTS BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. RELIA NCE WAS PLACED ON THE FOLLOWING CASE-LAWS:- I) AWADESH PRATAP SINGH ABDUL REHMAN & BROS. VS. CI T (1994) 76 TAXMAN 106 (ALL.) [HON'BLE ALLAHABAD HIGH COURT] II) RAM CHANDRA SINGH RAMNEEKLAL VS. CIT 42 ITR 780 [HON'BLE PATNA HIGH COURT] III) S.V. VIJAY LAXMI VS. ITO REPORTED IN 260 ITR 1 38 [HON'BLE KERALA HIGH COURT] THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAD S HOWN GP RATE AT 12% (BEFORE DEPRECIATION, INTEREST AND REMUNERAT ION) FOR A.Y. 2007- 08. THE ASSESSING OFFICER APPLIED GP RATE OF 12% S UBJECT TO INTEREST AND WORKED OUT THE TAXABLE INCOME AT RS. 1,38,68,93 0/-. 4 6 . BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER TO T HE LEARNED CIT(A) AND SUBMITTED THAT THE ASSESSEE MAINTAINED A REGULAR BOOKS OF ACCOUNTS, WHICH WERE DULY AUDITED AND THE ENTIRE CO NTRACT RECEIPTS WERE FULLY AND PROPERLY VOUCHED, THE SAME WERE VERI FIABLE FROM TDS. IT WAS FURTHER STATED THAT THE BOOKS SO, MAINTAINED WERE SUBJECT TO AUDIT. THE EXPENDITURES CLAIMED WERE FULLY AND PRO PERLY VOUCHED, THEREFORE, THE PROVISIONS OF SECTION 145 OF THE ACT WERE NOT APPLICABLE. IT WAS FURTHER STATED THAT WHILE FRAMING THE NP RAT E, THE ASSESSING OFFICER DID NOT CONSIDER THE PAST HISTORY AND THAT THE NP RATE HAD TO BE BASED ON THE PAST HISTORY OF THE ASSESSEE AS HAS BE EN HELD BY THE HON'BLE RAJASTHAN HIGH COURT IN THE FOLLOWING CASES :- 1) CIT VS. INANI MARBLES PVT. LTD. (175 TAXMAN 56) 2) CIT VS. SURESH MARBLES PVT. LTD. (18 DTR 118) 3) CIT VS. SHRI SINDHUJA FOODS PVT. LTD. (16 DTR 278) 7 . LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSING OFFICER ASKED SPECIFIC DETAILS TO SUPPORT THE FINANCIAL RESULTS SHOWN BY THE ASSESSEE, BUT TH OSE WERE NOT FURNISHED BEFORE THE ASSESSING OFFICER, THEREFORE, INVOCATION OF SECTION 145 WAS JUSTIFIED. LEARNED CIT(A) WAS OF THE VIEW THAT AFTER REJECTION OF THE BOOKS OF ACCOUNTS, THE NP RATE WAS INEVITABL E AND THE ITAT, 5 JODHPUR IN THE CASE OF AJAY GOYAL VS. ITO (99 TTJ 164) HELD THAT THE POSITION OF LAW IS WELL SETTLED THAT THE BEST GUIDE FOR ESTIMATION OF THE TRADING RESULTS AFTER REJECTING THE BOOKS IS EITHER THE PAST HISTORY OF THE ASSESSEE OR ANY OTHER COMPARABLE CASE, BUT THE PAST HISTORY OF THE ASSESSEE TAKES PREFERENCE OVER A COMPARABLE CASE. LEARNED CIT(A) POINTED OUT THAT THE ASSESSEE HAD SHOWN THE NP RATE AT 11% IN THE CURRENT YEAR AS AGAINST 10% IN THE IMMEDIATELY PREC EDING YEAR. HE, THEREFORE, HELD THAT WHEN THE ASSESSEE HAD SHOWN BE TTER GP AS COMPARED TO THE LAST YEAR, NO TRADING ADDITION WAS SUSTAINABLE. ACCORDINGLY, ADDITION MADE BY THE ASSESSING OFFICER WAS DELETED. RELIANCE WAS PLACED ON THE FOLLOWING CASE-LAWS:- 1) LAKHANI SHOES PVT. LTD. VS. ACIT (34 TW 32) 2) J.C. SHARMA VS. ITO (33 TW 82) 3) ITO VS. HITESH KUMAR PANCHORI (113 TTJ 357) NOW, THE ASSESSEE IS IN APPEAL. 8. LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF ASSES SING OFFICER AND SUBMITTED THAT SINCE THERE WERE SPECIFIC DEFECT S IN THE BOOKS OF ACCOUNTS, THEREFORE, ASSESSING OFFICER HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND MADE TH E ADDITION BY CONSIDERING THE PAST HISTORY OF THE ASSESSEES CASE . 9 . IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND 6 FURTHER SUBMITTED THAT THE ASSESSING OFFICER APPLIE D GP RATE FOR A.Y. 2007-08 AND INSTEAD OF GP RATE OF IMMEDIATELY PRECE DING YEAR, WHICH WAS 10% AND FOR THE YEAR UNDER CONSIDERATION, THE G P DECLARED BY THE ASSESSEE WAS AT 11%, THEREFORE, THE ADDITION WAS RI GHTLY DELETED BY THE LEARNED CIT(A). 10 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THERE WER E CERTAIN DEFECTS IN THE BOOKS OF ACCOUNTS, WHICH INVITED THE REJECTION OF BOOKS OF ACCOUNTS BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. IT IS WELL SETTLED THAT WHEN THE BOOKS ARE REJECTED, THE ONLY WAY TO DETERMINE THE TAXABLE INCOME IS ESTIMATION OF THE INCOME BY A PPLYING NP RATE OR GP RATE. IN THE INSTANT CASE, THE GP RATE AS WELL AS NP RATE DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AR E BETTER THAN THE PRECEDING YEAR. IN THE PRESENT CASE, TURNOVER OF T HE ASSESSEE INCREASED TO RS. 25.06 CRORES FROM RS. 10.07 CROROE S IN THE IMMEDIATELY PRECEDING YEAR. THE GP RATE INCREASED TO 11% FROM 10% AND SIMILARLY, THE NP INCREASED TO 4.47% FROM 0.62% , WHICH CLEARLY SHOWS THAT GP RATE AS WELL AS NP RATE SHOWN BY THE ASSESSEE WERE PROGRESSIVE IN COMPARISON TO THE IMMEDIATELY PRECED ING YEAR. THEREFORE, ASSESSING OFFICER WAS NOT JUSTIFIED IN A PPLYING GP RATE OF 7 THE YEAR PRECEDING TO THE PRECEDING YEAR AND IGNORI NG THAT OF THE IMMEDIATELY PRECEDING YEAR. IT IS ALSO RELEVANT TO POINT OUT THAT EVEN NP RATE FOR THE YEAR UNDER CONSIDERATION WAS BETTER , THEN THE PRECEDING YEAR AS WELL AS THE YEAR PRECEDING TO THE PRECEDING YEAR. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACT S AS DISCUSSED HEREIN ABOVE, ARE OF THE CONFIRMED VIEW THAT THE LEARNED CIT(A) WAS FULLY JUSTIFIED IN DELETING THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER. WE DO NOT SEE ANY VALID GROUND TO INTERFE RE WITH THE FINDINGS OF THE LEARNED CIT(A). IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 11 . IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMIS SED. (ORDER PRONOUNCED IN THE COURT ON 18 TH SEPTEMBER, 2013). (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18 TH SEPTEMBER, 2013. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.