Shri Syed Hafazat Ali, Kasrawad V. The ITO, Khargone

ITA 259/IND/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 9417 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 05-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: S S DESHPANDE

Judgement Text

PAGE 1 OF 5 I.T.A.NO. 259/IND/2007. SYED HIFAZAT ALI, KASRAWAD IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : ACYPA8533E. I.T.A.NO. 259/IND/2008 A.Y. : 2003-04 SHRI SYED HIFAZAT ALI, INCOME-TAX OFFICER, KASRAWAD, VS KHARGONE. DISTRICT KHARGONE APPELLANT RESPONDENT APPELLANT BY : SHRI S.S.DESHPANDE, C. A. RESPONDENT BY : SMT.APARNA KARAN, SR. DR DATE OF HEARING : 20.01.2010 O R D E R PER BENCH THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF ORDER OF THE LD. CIT(A)-II, INDORE, DATED 15.2.2008, FOR THE ASSESS MENT YEAR 2003-04. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE D ECISION OF THE LD. CIT(A) BY CONFIRMING THE ADDITION OF RS. 11,81, 595/- AT THE NET PROFIT RATE OF 5 %. PAGE 2 OF 5 I.T.A.NO. 259/IND/2007. SYED HIFAZAT ALI, KASRAWAD 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS WORKI NG AS AN ELECTRICAL CONTRACTOR. THE A.O. COMPARED THE PERCEN TAGE OF GROSS PROFIT AND NET PROFIT OF THE YEAR UNDER CONSIDERATION WITH THAT OF ASSESSMENT YEARS 2001-02 AND 2002-03. THE A.O. FOUND THAT GROS S PROFIT AND NET PROFIT RATE IN THE YEAR UNDER CONSIDERATION WAS MUC H LESS. THEREAFTER, THE A.O. REQUIRED THE ASSESSEE TO SUBMIT THE SIMILAR DE TAILS FOR ASSESSMENT YEAR 2004-05 AND 2005-06. FOR THE SAKE OF READY REF ERENCE , THESE DETAILS ARE REPRODUCED AS UNDER :- A.Y. 2001-02 2002-03 2003-04 2004-05 2005-06 GROSS RECEIPT 40,21,796 34,10,555 3,32,07,625 3,93,41,158 6,12,13,228 GROSS PROFIT 3,37,655 3,06,950 13,42,070 40,65,187 64,14,187 PERCENTAGE GROSS PROFIT 8.40 % 9.00 % 4.04 % 10.33 % 10.36 % NET PROFIT 1,80,100 1,68,430 4,67,850 19,68,662 30,96,411 PERCENTAGE NET PROFIT 4.48 % 4.94 % 1.40 % 5.00 % 5.00 % 5. THE ASSESSEE EXPLAINED THAT IN THIS YEAR, THE HIGH VALUE CONTRACTS HAD BEEN TAKEN FOR THE FIRST TIME AT VERY COMPETITI VE RATES, HENCE, THE GROSS PROFIT/NET PROFIT WAS LESS. HOWEVER, IN THE S UBSEQUENT YEAR, THE GROSS PROFIT AND NET PROFIT WAS HIGHER AND WHICH FA CT PROVED THE PAGE 3 OF 5 I.T.A.NO. 259/IND/2007. SYED HIFAZAT ALI, KASRAWAD GENUINENESS OF THE CLAIMS OF THE ASSESSEE. THE A.O. , HOWEVER, REJECTED THIS CONTENTION OF THE ASSESSEE, BECAUSE NO DOCUMEN TARY EVIDENCE HAD BEEN PRODUCED IN SUPPORT OF THIS CONTENTION. THE A. O., THEREAFTER, ALSO WORKED OUT THE RATIO OF COST OF MATERIAL CONSUMED W ITH THAT OF GROSS RECEIPT, WHICH SHOWED THAT THERE WAS A RISE IN THE COST OF CONSUMPTION OF MATERIAL AS COMPARED TO EARLIER YEARS AS WELL AS SU CCEEDING YEARS. HOWEVER, THE A.O. ASKED THE ASSESSEE TO PRODUCE STO CK RECORDS AND OTHER DETAILS. THE A.O. FURTHER FOUND THAT PURCHASES WORT H RS. 25,49,260/- HAD BEEN SHOWN AS ON 31.3.2003 AND STOCK AS ON DATE WAS ONLY RS. 3,25,000/- FOR WHICH THE ASSESSEE REPLIED THAT THOUGH BILLS WE RE RECEIVED FOR THAT DATE, HOWEVER, MATERIAL HAD ALREADY BEEN RECEIVED E ARLIER AND CONSUMED. THE A.O. , HOWEVER, BASED UPON THE ENQUIRIES MADE B Y HIM, HELD THAT THE ASSESSEE HAD DELIBERATELY INFLATED THE COST OF MATE RIAL CONSUMED AND SUPPRESSED THE GROSS PROFIT AND NET PROFIT. ACCORDI NGLY, HE REJECTED THE BOOK RESULTS BY APPLYING PROVISIONS OF SECTION 145( 3) AND ADOPTED A RATE OF 8 % OF GROSS RECEIPTS AND COMPUTED THE INCOME FR OM BUSINESS AT RS. 26,56,610/-. AGGRIEVED BY THIS, THE ASSESSEE CARRIE D THE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN SUBMISSIONS MADE BEF ORE THE A.O. WERE REITERATED. THE LD. CIT(A), HOWEVER, FOUND THAT THE EXPENSES ON ACCOUNT OF MATERIAL CONSUMED AND LABOUR AGGREGATED TO 97 % OF THE TOTAL EXPENSES, FOR WHICH THE ASSESSEE WAS NOT HAVING STO CK PAGE 4 OF 5 I.T.A.NO. 259/IND/2007. SYED HIFAZAT ALI, KASRAWAD RECORDS/DOCUMENTARY EVIDENCES. HENCE, HE CONFIRMED THE ACTION OF THE A.O. IN REGARD TO REJECTION OF BOOKS OF ACCOUNT/BOO K RESULTS. HOWEVER, THE LD. CIT(A) HELD THAT PROPER BASIS TO WORK OUT T HE TRADING RESULT WOULD BE NET PROFIT @ 5% AS AGAINST 8 % ADOPTED BY THE AS SESSING OFFICER AND GAVE A RELIEF OF RS. 9,96,229/- TO THE ASSESSEE. AG GRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE NARRATED THE F ACTS AND ARGUED THE MATTER AT LENGTH BESIDES REITERATING THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES. 7. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER H AND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). 8. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 9. IT IS NOTED THAT THE ASSESSEE IS A CONTRACTOR. THE TURNOVER IN THE YEAR UNDER CONSIDERATION HAS INCREASED IN A VERY SU BSTANTIAL MANNER AS AGAINST THE TURNOVER OF EARLIER TWO YEARS. IT IS FU RTHER NOTED THAT IN THE SUBSEQUENT TWO YEARS, NET PROFIT @ 5% OF THE GROSS RECEIPTS HAS BEEN SHOWN ON THE SIMILAR VOLUME AND IN RESPECT OF SIMIL AR BUSINESS ACTIVITIES, WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. THE COST OF MATERIAL HAS ALSO INCREASED IN THE YEAR UNDER CONSIDERATION, WHICH FA CT GIVES SOME CREDENCE TO THE CLAIMS MADE BY THE ASSESSEE REGARDING GETTIN G OF CONTRACTS AT PAGE 5 OF 5 I.T.A.NO. 259/IND/2007. SYED HIFAZAT ALI, KASRAWAD COMPETITIVE PRICE. THE LD. CIT(A) HAS TAKEN A BASE OF 5% AS SHOWN BY THE ASSESSEE IN SUBSEQUENT YEAR. HOWEVER, IN OUR OP INION, SOME MORE RELIEF SHOULD BE GIVEN TO THE ASSESSEE FOR THE REAS ON THAT IT IS THE FIRST YEAR OF SUCH OPERATIONS. ACCORDINGLY, IN OUR VIEW, INTER ESTS OF JUSTICE WOULD BE MET IF THE RATE OF NET PROFIT IS REDUCED TO 4 %. AC CORDINGLY, GROUND NOS. 1 & 2 OF THE ASSESSEE ARE ACCEPTED. WE NEED NOT EXPRE SS ANY OPINION ON GROUND NOS. 3 & 4 IN VIEW OF OUR DECISION AS ABOVE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 28 TH JANUARY, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :28 TH JANUARY, 2010. CPU* 25271