M/s. Bahufort Construction Pvt. Ltd., Jammu V. The Deputy. Commissioner of Income-tax, Jammu

ITA 254/ASR/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73240 (ITAT-AMRITSAR)
• Duration Of Justice: 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Depreciation; Opportunity of being heard
• Section: 142(1); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.254(ASR)/2013 ASSESSMENT YEAR:2009-10 PAN :AABCB9275A M/S. BAHU FORT CONSTRUCTION VS. THE DY.COMMR. OF IN COME TAX, PVT. LTD; 120, R.N.PURA. CIRCLE-2, JAMMU. JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.P.N.ARORA, ADVOCATE RESPONDENT BY:SH. MAHAVIR SINGH, DR DATE OF HEARING: 23/01/2014 DATE OF PRONOUNCEMENT:14/02/2014 ORDER PER BENCH ; THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER OF THE CIT(A), JAMMU DATED 20.02.2013 FOR THE ASSESSMENT Y EAR 2009-10. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1 THAT THE ASSESSMENT ORDER AS WELL AS THE ORDER O F THE LD. CIT(A) ARE BOTH AGAINST THE FACTS OF THE CASE AND U NTENABLE IN LAW. 2. THAT THE AO HAS GROSSLY ERRED IN PASSING ORDER U /S 144 OF THE ACT. THE AO DID NOT APPRECIATE THAT THE BOOKS OF AC COUNTS WERE ITA NO.254(ASR)/2013 2 DULY PRODUCED BEFORE HIM AND HE HAS NOT BEEN ABLE TO PIN POINT ANY DEFECT, OMISSION OR COMMISSION. THUS, THE AO HA S GROSSLY ERRED IN PASSING THE ORDER U/S 144 OF THE ACT, WITH OUT ANY RHYME & REASON. 3. SIMILARLY, THE LD.CIT(A) HAS GROSSLY ERRED IN CO NFIRMING THE ORDER OF THE AO PASSED U/S 144 OF THE ACT. 4. THAT THE AUTHORITIES BELOW SHOULD HAVE ACCEPTED THE BOOKS OF ACCOUNTS AS MAINTAINED BY THE ASSESSEE AND THE RETU RNED LOSS SHOULD HAVE BEEN ACCEPTED. THERE IS NO SPECIFIC REA SON OR OCCASION FOR REJECTING THE BOOKS OF ACCOUNTS BY INV OKING THE PROVISIONS OF SECTION 144 OF THE ACT. 5. THAT THE AUTHORITIES BELOW DID NOT APPRECIATE T HAT THIS IS A CASE OF TAX AUDIT AND THE BOOKS OF ACCOUNTS ARE DULY AUD ITED BY THE C.A. AND THE AUDIT REPORT WAS DULY FURNISHED WITH T HE DEPARTMENT AND THE BOOKS OF ACCOUNTS SHOULD HAVE BE EN ACCEPTED ESPECIALLY WHEN NO DEFECT OR OMISSION OR C OMMISSION WHATSOEVER HAS BEEN POINTED OUT BY THE AO. IN VIEW OF THESE CIRCUMSTANCES, NO ADDITION WAS CALLED FOR AND THE L OSS AS RETURNED MAY BE ACCEPTED. 6. AGAIN, THE AO IN HAS GROSSLY ERRED APPLYING A RA TE OF 10% ON THE NET RECEIPTS OF RS.1,48,73,021/- AND THEREBY AS SESSING THE INCOME AT RS.1487302/-. SIMILARLY, THE LD. CIT(A) H AS GROSSLY ERRED IN SUSTAINING THE RATE OF PROFIT @ 7% ON THE RECEIPTS OF RS.14873021/-. IT IS PRAYED THAT THE ACCOUNTS AS SH OWN MAY BE ACCEPTED ESPECIALLY WHEN THE BOOKS OF ACCOUNTS ARE NOT REJECTED AND NO MATERIAL WHATSOEVER HAS BEEN PLACED ON THE R ECORD FOR NOT ACCEPTING THE BOOKS OF ACCOUNTS. ALTERNATIVELY, THE RATE SUSTAINED BY THE CIT(A) @ 7% IS VERY HIGH & EXCESSIVE ESPECIALLY WHEN THE LD. ITAT, AMRI TSAR BENCH, HAS ACCEPTED MUCH LOWER RATE OF PROFIT IN TH E CASE OF OTHER CONTRACTORS. THUS, THE RATE OF PROFIT SUSTAIN ED BY THE LD. CIT(A) IS VERY HIGH & EXCESSIVE. 7. AGAIN, THE AO IN HAS GROSSLY ERRED IN MAKING AN ADDITION OF RS.3095252/- ON ACCOUNT OF SO-CALLED REMISSION OF L IABILITY. ITA NO.254(ASR)/2013 3 SIMILARLY, THE LD. CIT(A) DID NOT APPRECIATE THAT T HIS WAS NOT A REMISSION OF LIABILITY BUT IT WAS A CONTRACTUAL REC EIPT AFTER SETTLEMENT OF THE ACCOUNTS WITH M/S. J.P. ASSOCIATE S AS THE ASSESSEE WAS A CONTRACTOR. THE AUTHORITIES BELOW WE RE NOT AT ALL JUSTIFIED IN TREATING THE SAME AS REMISSION OF LIAB ILITY AT RS.3095252/-. THESE WERE THE CONTRACTUAL RECEIPTS W HICH WERE RECEIVED BY THE APPELLANT FROM M/S. JAI PARKASH ASS OCIATES LTD; AND THE TDS WAS DULY DEDUCTED ON THE SAME. 8. FURTHER, THE LD. CIT(A) HAS GROSSLY ERRED IN CON FIRMING THE ORDER OF THE AO WITHOUT ANY RHYME & REASON AND EVEN IN THE REMAND REPORT THE AO HAS NOT PLACED ANY MATERIAL ON RECORD AGAINST THE ASSESSEE FOR MAKING AN ADDITION OF RS. 3095252/- AND THE AO IS COMPLETELY SILENT ON THIS POINT. THIS POINT WAS BROUGHT TO THE NOTICE OF THE WORTHY CIT(A) IN OUR R EJOINDER DATED 13.02.2013 ON WHICH THE LD. CIT(A) IS ALSO S ILENT ON THIS ISSUE AND PRESUMABLY HE HAS ACCEPTED THIS ISSUE IN FAVOUR OF THE ASSESSEE. 9. THAT THE LD. AO DID NOT APPRECIATE THAT THE SO-C ALLED RECEIPTS OF RS.30,95,252/- ON ACCOUNT OF CONTRACT CANNOT BE ASS ESSED AS INCOME WHEN THE BOOKS OF ACCOUNTS ARE DULY MAINTAI NED AND THE BALANCE SHEET WAS DULY FURNISHED. THUS THIS ADD ITION OF RS.3095252/- IS NOT AT ALL CALLED FOR AND THE LD. C IT(A) HAS GROSSLY ERRED IN CONFIRMING THE SAME. ALTERNATIVELY, AT THE MOST THE RATE OF PROFIT @ 2% ON THE SAID CONTRACT RECEIPTS COULD HAVE BEEN APPLIED BY THE WO RTHY CIT(A). 10. ANY OTHER GROUND OF APPEAL WHICH MAY BE URGED A T THE TIME OF HEARING OF THE APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE AO HAS REJECTED THE BOOKS OF ACCOUNT AND HAS APPLIED NET PROFIT RATE OF 10% ON T HE NET CONTRACT RECEIPTS OF RS.1,48,73,021/- AND WORKED OUT THE NET PROFIT AT R S.14,87,302/- AND ADDED ITA NO.254(ASR)/2013 4 RS.30,95,252/- AS REMISSION OF LIABILITY. THE OBSER VATIONS OF THE AO ARE BEING REPRODUCED HEREINBELOW FOR THE SAKE OF CONVEN IENCE: RETURN OF INCOME DECLARING A LOSS OF RS.17,623/- WA S E-FILED BY THE ASSESSEE ON 29/08/2011. SINCE THE ASSESSEE HAD FAILED TO FILE ITS RETURN OF INCOME BY 31/03/2011, THE RETURN FILED BY THE ASSESSEE ON 29/08/2011 WAS NONEST RETURN AND NO COGNIZANCE OF T HE SAME WAS TO BE TAKEN AND AT THE MOST IT WAS A PIECE OF INFORMAT ION WHICH COULD BE USED FOR FRAMING ASSESSMENT U/S 144 OF THE ACT. A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE ALON GWITH NOTICE U/S 142(1) TO EXPLAIN AS TO WHY NET PROFIT R ATE OF 10% MAY NOT BE APPLIED ON THE RECEIPTS OF RS.2,77,71,500/- AS S HOWN IN THE RETURN OF INCOME ALONGWITH AMOUNT OF RS.56,98,119/- WHICH HAD BEEN RECEIVED FROM M/S. JAI PARKASH ASSOCIATES LIMITED A S BOOKS OF ACCOUNT PRODUCED BY ASSESSEE WERE NOT SUPPORTED BY VOUCHERS, BILLS. IN HIS REPLY DATED 15.12.2011, THE ASSESSEE OBJECTE D TO THE APPLICATION OF 10% RATE ON GROSS RECEIPTS BY RELYIN G UPON VARIOUS CASE LAWS I.E. I) M/S. CONSTRUCTION ENGINEERS VS. ADDL. CIT, R-3 SRIN AGAR. II) CIT VS. LAXMINARAIN BADRI DAS (1937) 5 ITR (PC) III) RAGHUBAR MANDAL HARHAR MANDAL VS. STATE OF BIHAR (1957) 8 STC 770(SC) IV) STATE OF KERAL VS. C. VELUKUTTY (1966) 66 ITR 239 ( SC) IT WAS ALSO STATED BY HIM THAT THE ASSESSEE HAD SUF FERED LOSSES DURING THE PERIOD DUE TO FORECLOSURE OF THE CONTRA CT AND TO SAVE THEMSELVES FROM THE WRATH OF THE WORKERS THEY WERE COMPELLED TO HAND OVER ALL THEIR ASSETS EXCEPT FOR AN OLD CAR IN LIEU OF THE DUES PAYABLE TO THEM. IN VIEW OF THESE FACTS, IT WA S STATED THAT PROFIT RATE OF 10% MAY NOT BE APPLIED IN HIS CASE. THE REASONS MENTIONED BY THE ASSESSEE FOR NON APPLI CATION OF RATE OF 10% ON THE BASIS OF ABOVE CASE LAWS HAVE BE EN EXAMINED AND IN THIS REGARD, IT IS MENTIONED THAT T HE ITAT, AMRITSAR HAS UPHELD THE APPLICATION OF 10% RATE IN THE CASE OF M/S. POOJA CONSTRUCTION COMPANY IN ITA NO.750(ASR)/ 1992 ITA NO.254(ASR)/2013 5 (69 ITD 147) BY HOLDING THAT DEPRECIATION HAVING BE EN ALREADY TAKEN INTO ACCOUNT THE SAME COULD NOT BE TAKEN INTO ACCOUNT ONCE AGAIN. THE SAID ORDER HAS BEEN UPHELD BY THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN THEIR ORDER IN I TR NO.166 OF 1999 DATED 10/09/2010. IN VIEW OF THE ABOVE DISCUSSION AND ALSO KEEPING I N VIEW THE FACT AND ALSO THE FACT THAT THE LD. AR WAS INFORMED ON 22.11.2011 THAT THE BOOKS OF ACCOUNT WERE NOT RELIA BLE AS THESE WERE WITHOUT SUPPORTING VOUCHERS TO WHICH ASSESSEE STATED THAT BEING IN STATE OF DISTRESS HE HAS NOT BEEN ABL E TO RETRIEVE HIS RECORDS FROM DIFFERENT DESTINATIONS AND AT PRES ENT HE HAS NO RECORD TO SUBSTANTIATE HIS CLAIMS. THE ASSESSEES C LAIM CANNOT BE TAKEN AS CORRECT AS HE HAD NOTHING IN HIS POSSES SION TO SUPPORT HIS CLAIM. KEEPING IN VIEW, THE ABOVE DISCUSSION AND OVER ALL FACTS AND CIRCUMSTANCES OF THE CASE, A NET PROFIT RATE OF 10% IS APPLIED ON THE PAYMENTS OF RS.2,77,71,500 AS REDUCED BY RS.1,2 8,98,479/- REPRESENTING DEPARTMENTAL STORES FOR WHICH AN AFFID AVIT HAS BEEN FILED BY THE ASSESSEE. THE NET RECEIPTS AVAILA BLE ARE RS.1,48,73,021/- ON WHICH NET PROFIT RATE IS BEING APPLIED AND THE NET PROFIT WORKS OUT TO RS.14,87,302/-. PENALTY PROCEEDINGS U/S 271(1)(C) ARE BEING INITIATED FOR CONCEALING TH E TRUE PARTICULARS OF INCOME BY THE ASSESSEE AS I AM SATIS FIED THAT IT IS A FIT CASE FOR INITIATING PENALTY PROCEEDINGS U/S 2 71(1)(C). WITH THESE REMARKS, THE INCOME OF ASSESSEE IS BEING COMPUTED AS UNDER: INCOME FROM CONTRACT BUSINESS RS.14,87,302 OTHER INCOME AS SHOWN ON ACCOUNT OF REMISSION OF LIABILITY RS.30,95,252 TOTAL ASSESSED INCOME RS.45,82,554 3. BEFORE THE LD. CIT(A), THE LD. COUNSEL FOR THE A SSESSEE MADE THE SUBMISSIONS, WHICH WERE SENT TO THE AO, WHO SUBMITT ED THE REMAND REPORT AND COPY OF THE REMAND REPORT WAS GIVEN TO THE ASSE SSEE, WHO REJOINED THE ITA NO.254(ASR)/2013 6 SAME. THE LD. CIT(A) AFTER CONSIDERING THE REMAND R EPORT AND THE COMMENTS OF THE ASSESSEE OBSERVED AS UNDER: I HAVE GONE THROUGH THE ASSTT. ORDER, THE REMAND RE PORT SUBMITTED BY THE AO CONCERNED AND THE SUBMISSION OF THE ASSESSEE . THERE ARE THREE ISSUES INVOLVED IN THE APPEAL I.E. I) CHALLENGING THE ASSESSMENT ORDER UNDER SEC. 144 A FTER REJECTING OF BOOKS OF ACCOUNT. II) CHALLENGING OF RATE OF PROFIT @ 10% APPLIED BY THE AO AND III) THE ADDITION OF RS.30,95,252/-. 5.1. SO FAR CHALLENGING THE ASSESSMEN ORDER U/S 14 4 AFTER REJECTION OF BOKS OF ACCOUNT IS CONCERNED, THERE IS NO FORCE IN THE ARGUMENTS OF THE ASSESSEE. THE ASSESSEE DID NOT COMPLY WITH THE NOTICE U/S 142(1) FOR FILING OF RETURN AND ALSO NOT PRODUCED BY THE B OOKS OF ACCOUNT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AP PELLANT IS RAISING ONLY LEGAL GROUND FOR SAKE OF IT WITHOUT ANY SUBSTA NCE. I FIND THAT THE AO HAS GIVEN ADEQUATE OPPORTUNITIES BEFORE ASSESSME NT AND APPLIED HIS MIND. HE HAS DEDUCTED THE COST OF MATERIAL BEFO RE APPLYING FLAT RATE OF PROFIT OF 10%. THEREFORE, ASSESSMENT HAS R IGHTLY BEEN MADE TO THE BEST OF HIS JUDGMENT. CONCERNING THE ISSUE AND QUANTUM OF ADDITION THEY HAVE BEEN DISCUSSED BELOW. 5.2. CONCERNING THE GRIEVANCE OF APPLICATION OF RAT E OF PROFIT OF 10% ON CONTRACT RECEIPTS, IT IS TO MENTION THAT THE AO HAD NO OPTION BUT TO ESTIMATE PROFIT WHEN THE APPELLANT DID NOT P RODUCE THE BOOKS OF ACCOUNTS AND ANCILLARY VOUCHERS. REGARDING RATE I F IND THAT RATE OF 10% IS EXCESSIVE IN VIEW OF THE FACT THAT THE APPE LLANT HAS TO FORE CLOSE ITS CONTRACT WITH THE TWO PRINCIPAL CONTRACTE ES. HAD THERE BEEN REASONABLE PROFITS THESE CONTRACTS COULD NOT HAVE B EEN FORE CLOSED BY THE APPELLANT AND HE SHOULD NOT HAVE BEEN COMPELLED FOR SETTLEMENT AFTER EXITING THE CONTRACT. IN THE INTEREST OF JUST ICE, I AM OF THE VIEW THAT A RATE OF 7% ON THE CONTRACT AMOUNT ON THE LIN E OF JUDGMENT OF HONBLE ITAT IN THE CASE OF M/S. CONSTRUCTION ENGIN EERS VS. ADDL. CIT RANGE-3, SRINAGAR IN ITA NO.493(ASR)/2010 DATED 10.05.2010 WOULD SERVE THE PURPOSE OF JUSTICE. I, THEREFORE, D IRECT THE AO TO APPLY A RATE OF 7% INSTEAD OF 10% BUT NO OTHER DEDUCTION I.E. DEPRECIATION AND INTEREST AND SALARY PAID TO PARTNERS WOULD BE ALLOWED. ITA NO.254(ASR)/2013 7 5.3. AS REGARDS THE ADDITION OF RS.30,95,252/- ON A CCOUNT OF REMISSION OF LIABILITY IS CONCERNED, AFTER GOING TH ROUGH THE ASSESSMENT ORDER, REMAND REPORT AND SUBMISSIONS OF THE APPELLA NT, I FIND THAT ADDITION HAS RIGHTLY BEEN MADE. FROM THE CONSTRUCTI ON, TRADING AND PROFIT & LOSS ACCOUNT OF THE APPELLANT AS ON 31.03 .2009, IT IS SEEN THAT THE APPELLANT HAS SHOWN UNDER THE HEAD OTHER RECEI PTS AN AMOUNT OF RS.30,95,252/- ALONG WITH GROSS RECEIPT OF RS.2, 77,71,500/- . THE APPELLANT IN ITS SUBMISSION HAS STATED THIS TO BE O N ACCOUNT OF RECEIPT FOR CERTAIN EXPENSES INCURRED BY IT AND PAYMENT REC EIVED IN LIEU OF THAT AGAINST PIER NO., P2 OF BRIDGE NO.121 FORM JAI PRAKASH ASSOCIATES LTD. HE FURTHER STATED THAT THERE WAS NO REMISSION OF LIABILITY BY M/S. JAI PRAKASH ASSOCIATES LTD. THIS STATEMENT OF THE APPELLANT IS NOT CORRECT BECAUSE AS PER PARA 9 OF T HE FINAL SETTLEMENT BETWEEN THE APPELLANT AND M/S. JAI PRAK ASH ASSOCIATES LTD., THE AMOUNT WHICH WAS TO BE RECEIVED AGAINST PIER NO.P2 OF BRIDGE NO.121 WAS RS.26,24,145/- AND NOT RS.58,98,1 19/- [OF WHICH RS.30,95,252/- IS THE PART] THE RELEVANT PART OF PA RA 9 IS REPRODUCED HEREUNDER: THE FIRST PARTY ALSO AGREED TO RELEASE ON HUMANITA RIAN GROUNDS AS THE 2 ND PARTY HAS VIRTUALLY CAME TO ROADSIDE, AN AMOUNT OF RS.26,24,145/- AGAINST PIER NO.P2 OF BRID GE NO.121, WHICH AS PER CONTRACT AGREEMENT IS NOT TO BE RELEAS ED UNTIL THIS ISSUE IS SETTLED BETWEEN IST PARTY AND IRCON INTERN ATIONAL LIMITED THIS AMOUNT WAS TO BE RELEASED SUBJECT TO THE SETTL EMENT OF ISSUE BETWEEN M/S. JAI PRAKASH ASSOCIATES LTD. AND PRINCI PLE CONTRACTEE IRCON INTERNATIONAL LIMITED, WHICH WAS NOT FINALIZE D AT THE TIME OF FINAL SETTLEMENT. THEREFORE, THE AMOUNT TO BE RELEA SED AGAINST PIER NO.P2 OF BRIDGE 121 WAS YET TO BE RECEIVED BY THE A PPELLANT AT THE TIME OF SETTLEMENT. CONCERN RELEASE OF RS.58,95,119/- [OF WHICH THE AD DITION OF RS.30,95,252/- IS THE PART], THE RELEVANT PART OF P ARA 9 OF SETTLEMENT IS AS UNDER: WHEREAS IIND PARTY PLEASED BEFORE, IST PARTY, ITS LIABILITY TO EVEN REPAY THE LOAN AND GET THEIR RESIDENTIAL HOUSE FREE FROM LIABILITIES. THE IST PARTY, AFTER TAKING A COMPASSI ONATE VIEW ON ITA NO.254(ASR)/2013 8 THE REQUEST OF IIND PARTY, HAS CONSIDERED AND AGRE ED TO WAIVE OFF AN AMOUNT OF RS.58,44,30,16/- ON HUMANITARIAN G ROUNDS, AGAINST THE HIRE CHARGES OF EQUIPMENT AND THE COST OF CEMENTS AND AGGREGATE CONSUMED IN THE CONCRETE PLACED IN UN ACCEPTED GEOLOGICAL OVER BREAK. THESE TWO ITEMS I.E. HIRE CH ARGES OF EQUIPMENT AND COST OF CEMENT AND CONCRETE, AS PER A GREEMENT, WAS TO BE RECOVERED FROM IIND PARTY. THE ABOVE AMOUNT OF RS.58,95,119/- WAS PAID BY THE IST PARTY TO THE APPELLANT AND THE APPELLANT HAS TAKEN RS.30, 95,252/- IN THE PROFIT AND LOSS ACCOUNT AS OTHER RECEIPTS. THE REMA INING AMOUNT OF RS.27,99,867/- MIGHT HAVE BEEN INCLUDED IN THE GROS S CONTRACT RECEIPT OF RS.2,77,71,500/- . IN MY OPINION THE APPELLANT H AS BIFURCATED THE RECEIPT OF RS.58,95,119/- INTO TWO PARTS. I) RS.30.95,252/- AS OTHER RECEIPTS OTHER THAN RELATABLE TO EXPENSES RELATING TO CONTRACT . II) RS.27,99,867/- TOWARDS EXPENDITURE RELATING TO CONTRACT. THEREFORE, THE ACCOUNTING TREATMENT ITSELF SUGGESTS THAT THE SUBMISSION OF THE APPELLANT IS NOT CORRECT AND RS.3 0,95,252/- CANNOT BE LINKED TO REIMBURSEMENT OF AMOUNT FOR TH E WORK DONE IN THE CONTRACT. IN VIEW OF ABOVE FINDINGS, I AM OF THE OPINION THAT THE ADDITION MADE BY THE AO IS JUSTIFI ED AND ACCORDINGLY UPHELD. 4. THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N.ARORA, RELIED UPON THE SUBMISSIONS MADE WHICH ARE REPRODUCED AS A COMMENTS TO THE REMAND REPORT. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPO N THE DECISION OF ITAT, AMRITSAR BENCH IN THE CASE OF MOHAN SINGH CONTRACTO R VS. ITO IN ITA NO.59(ASR)/2012 DATED 5.6.2012 FOR THE ASSESSMENT Y EAR 2008-09, WHEREIN ON IDENTICAL FACTS, THE NET PROFIT RATE OF 5% HAS B EEN APPLIED. HE FURTHER RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CAS E OF ITO VS. M/S. SURINDER ITA NO.254(ASR)/2013 9 PAL NAYYAR CONTRACTORS, NAWANSHAHAR IN ITA NO.366(A SR)/2010 ORDER DATED 30.04.2012 RELATING TO A.Y. 2006-07, WHERE AGAIN ON IDENTICAL FACTS, NET PROFIT RATE OF 5% HAS BEEN APPLIED. 5. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE D ID NOT COMPLY WITH THE NOTICE U/S 142(1) OF THE ACT FOR FILING THE RETURN OF INCOME AND THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNT DURING THE AS SESSMENT PROCEEDINGS, INSPITE OF ADEQUATE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE WAS AFFORDED. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER PASSE D BY THE LD. CIT(A), WHO HAS RIGHTLY CONFIRMED THE ACTION OF THE AO IN PASSI NG ORDER U/S 144 AS BEST OF HIS JUDGMENT. 6.1. AS REGARDS THE ESTIMATION OF NET PROFIT RATE , THE AO HAS APPLIED NET PROFIT RATE OF 10% ON NET RECEIPTS OF RS.1,48,73,02 1/- I.E. GROSS PAYMENTS OF RS.2,77,71,500/- AS REDUCED BY RS.1,28,98,479/- REP RESENTING DEPARTMENTAL STORES. AS REGARDS THE NET CONTRACT RECEIPTS TAKEN AT RS.1,48,73,021/-, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO HAS NOT TAKEN INTO ITA NO.254(ASR)/2013 10 CONSIDERATION THE SUBMISSIONS IN THE REMAND REPORT WHICH ARE REPRODUCED FOR THE SAKE OF CONVENIENCE AS UNDER: 3.8.1. THAT THE ASSESSEE HAD EXECUTED WORK AMOUNTI NG TO RS.2,77,71,500 FOR BHUMI DEVELOPERS PVT. LTD. AND H AS RECEIVED ONLY RS.95,43,953/- AFTER DEDUCTIONS, RECOVERIES, AND BO OK ADJUSTMENTS OF CREDITORS (PAGES 1-15) AND PAGES 18-21) AS PER DETA IL GIVEN BELOW: OPENING BALANCE AS AT 1.4.2008 16,71,148.00 CREDI T OPENING WORK DONE AS AT 1.4.2008 24,50,776.00 DEBI T WORK DONE DURING 1.4.08 TO 31.3.2009 2,77,7 1,500.00 DEBIT TOTAL RECEIVABLE (A) 2,85,51,128.00 LESS DEDUCTIONS RETENTION MONEY 13,88,575 TAX DEDUCTED AT SOURCE 3,14,060.00 BOOK ADJUSTMENT ON A/C OF CREDITORS 4,06,061.00 RECOVERY ON ACCOUNT OF MATERIAL 1,28,98,479 .00 TOTAL DEDUCTIONS (B) 1,90,07,175.00 CASH RECEIVED DURING THE YEAR FROM BHUMI DEVELOPERS (A-B) 95,43,953.00 NO ARGUMENTS /OBJECTIONS HAVE BEEN RAISED BY THE A. O. IN HIS REMAND REPORT. 3.8.2. THE ASSESSEE HAD ALSO RECEIVED RS.57,88,940 (GROSS RS.58,95,119/-) FROM JAI PRAKASH ASSOCIATES LTD. ON ACCOUNT OF CERTAIN EXPENSES INCURRED ( AS PER CLAUSE 7 OF THE FINAL SETTLEMENT ENCLOSED) AND PAYMENT AGAINST PIER NO.P2 OF BRIDGE NO.121 ( AS PER CLAUSE 9 OF THE FINAL SETTLEMENT ENCLOSED) AS SUCH THERE WAS NO REMISSION OF LIABILITY OF JAI PRAKASH ASSOCIATES LT D. AS STATED BY THE AO WHILE FRAMING THE ASSTT. ORDER. CERTIFIED COPY O F FINAL SETTLEMENT WITH JAIPRAKASH ASSOCIATES LTD. ALONGWITH STATEMENT OF ACCOUNT MAINTAINED BY THE ASSESSEE WITH JAMMU AND KASHMIR B ANK LTD. CHANDERKOT BRANCH (PAGE 27-28 IS ENCLOSED). 6.2. ACCORDINGLY, THE ASSESSEES EXPLANATION THROUG H HIS COUNSEL, SH.P.N.ARORA, ADVOCATE WAS THAT NET RECEIPT SHOULD BE RS.95,43,953/- + ITA NO.254(ASR)/2013 11 RS.58,95,119/- AND NO SEPARATE ADDITION ON ACCOUNT OF REMISSION OF LIABILITY AMOUNT TO RS.30,95,252/- SHOULD BE MADE. IN THIS RE GARD, THE ARGUMENT MADE BY THE LD. COUNSEL AND THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) ARE FOUND TO BE CONVINCING THAT IN VIEW OF DECISION OF HONBL E SUPREME COURT IN THE CASE OF CIT VS. BRIJ BHUSHAN LAL PARDUMAN KUMAR 19 78 CTR (SC) 134, THE REAL TOTAL VALUE OF THE ENTIRE CONTRACT WOULD BE T HE GROSS VALUE MINUS THE COST OF SUCH MATERIAL SO SUPPLIED. THEREFORE, NO EL EMENT OF PROFIT WAS INVOLVED IN THE TURNOVER REPRESENTED BY THE COST OF MATERIAL SUPPLIED BY THE GOVT. TO THE ASSESSEE, THE INCOME DERIVED BY THE AS SESSEE FROM SUCH CONTRACT HAD TO BE DETERMINED ON THE BASIS OF THE VALUE OF C ONTRACT REPRESENTED BY THE CASH PAYMENTS RECEIVED BY THE ASSESSEE FROM THE GOV T. EXCLUSIVE OF THE COST OF THE MATERIAL RECEIVED FOR BEING USED. THEREFORE, IN THE FACTS AND CIRCUMSTANCES, THE CASE, THE LD. CIT(A) IS NOT JUS TIFIED IN MAKING ADDITION OF RS.30,95,252/- ON ACCOUNT OF REMISSION OF LIABILITY SEPARATELY AND THEREFORE, THE AO IS DIRECTED TO INCLUDE RS.58,95,119/- AND TH EREFORE, TOTAL CONTRACT RECEIPT HAS TO BE TAKEN AT RS.1,54,39,072/- (RS.95 ,43,953 + RS.58,95,119). THE NET PROFIT RATE OF 7% APPLIED BY THE LD. CIT(A) IS WITHOUT ANY BASIS AND THEREFORE, ON THE BASIS OF DECISIONS RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSE OF THE ITAT, AMRITSAR BENCH IN THE CASE OF SH. MOHAN SINGH CONTRACTOR VS. ITO (SUPRA) AND IN THE CASE OF ITO VS. M/S. SURINDER PAL ITA NO.254(ASR)/2013 12 NAYYAR CONTRACTORS (SUPRA), THE AO IS DIRECTED TO A PPLY NET PROFIT RATE OF 5% ON THE NET CONTRACT RECEIPTS OF RS.1,54,39,072/- AN D FURTHER DIRECT TO DELETE THE ADDITION OF RS.30,95,252/- ON ACCOUNT OF REMISS ION OF LIABILITY. ACCORDINGLY, THE ORDERS OF THE BOTH THE AUTHORITIES BELOW ARE MODIFIED AND THE AO IS DIRECTED TO MODIFY THE ORDER AS DIRECTED HEREINABOVE. THUS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.254(ASR)/2013 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14TH FEBRUARY, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14TH FEBRUARY, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. BAHUFORT CONSTRUCTION (P) LTD. JA MMU. 2. THE DCIT, CIR.2, JAMMU 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR