Dynamic Engineers, Kota V. Addl. CIT, Kota

ITA 269/JPR/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5375 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 04-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY MALIK CIT DHK
• Assessee Lawyers: DEVENDRA KUMAR
• Keywords: Unexplained cash credit; Rejection of books of accounts

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOE FLAG ;KNO] YS[KK LNL; ,OA JH YFYR DQEKJ] U ;KF;D LNL;DS LE{K BEFORE: SHRI VIKRAM SINGH YADAV, AM AND SHRI LALIE T KUMAR, JM VK;DJ VIHY LA-@ ITA NO.268/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2005-06 DYNAMIC ENGINEERS , E-20 CHAMBAL INDUSTRIAL AREA, KOTA. CUKE VS. THE DCIT, CIRCLE-1, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAAFD 9332 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO.269/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 DYNAMIC ENGINEERS , E-20 CHAMBAL INDUSTRIAL AREA, KOTA. CUKE VS. THE DCIT, CIRCLE-1, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAAFD 9332 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI DEVENDRA KUMAR (ADV.) JKTLO DH VKSJ LS@ REVENUE BY :S HRI AJAY MALIK (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 14.03.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : /03/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) KOTA DATED 31.01.2014 FOR A.YS. 2005-06 AND 2006-07 WHEREIN THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: A.Y. 2005-06 ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 2 (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A). KOTA ERRED IN CONFIRMING THE TRADING ADDITION OF RS. 2,8 5,569/- OUT OF THE TOTAL TRADING ADDITION OF RS. 5,21,409/- MADE BY THE A.O. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A). KOTA ERRED IN CONFIRMING DISALLOWANCE OF RS.11,814/- ON A/C OF CONVEYANCE EXPENSES MADE BY THE AO. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A). KOTA ERRED IN CONFIRMING DISALLOWANCE OF RS. 15,000/- OU T OF THE DISALLOWANCE OF RS. 25,000/- MADE BY THE AO ON A/C OF TRAVELLIN G EXPENSES. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A). KOTA ERRED IN CONFIRMING DISALLOWANCE OF RS.1100/- ON A/ C OF DONATION TO PRIME MINISTERS NATIONAL RELIEF FUND MADE BY THE A O. (5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A). KOTA ERRED IN CONFIRMING DISALLOWANCE OF RS.973/- MADE B Y THE AO ON A/C OF DELAYED PAYMENT OF ESI AND PF. (6) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A). KOTA ERRED IN CONFIRMING DISALLOWANCE OF RS.2763/- OUT O F DISALLOWANCE OF RS.5527/- MADE BY THE AO ON A/C OF WELCOME EXPENS ES. 2. THE LD. AR IN HIS WRITTEN SUBMISSION HAS STATED THAT THE APPELLANT IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING/FABRICATION OF GLUED INSULATED RAIL JOINTS AND CHANNEL SLEEPER AND EXECUTING WORKS CONTRACT AWARDED BY RAILWAY FOR SUPPLY OF MATERIAL AND EXECUTION OF WORK THROUGH LABOUR EMPLOYED BY IT AND ONLY BY LABOUR CONTRACT. THE CONTRACTS ARE AWARDED BY RAILWAY THOUGH OPEN TENDER OR O N R ATES FIXED BY THE RAILWAYS. IN THE CASE OF OPEN TENDER THE RATES AT WHICH WORK IS AWARDED ARE AT COMPETITIVE RATES. DURING THE PERIOD UNDER CONSIDERATION APPELLANT WA S AWARDED VARIOUS TENDER CONTRACTS AND THERE WAS ALSO ON GOING CONTRACTS. FURTHER APPELLANT WAS ALSO AWARDED SHORT TERM CONTRACT. SINCE THE APPELLANT W AS EXECUTING TENDER CONTRACTS APPELLANT AS A BUSINESS EXPEDIENCY SUB- CONTRACTED THE CONTRACTS TO OTHER CONCERNS FOR EXECUTION OF THOSE CONTRACTS. A LL THE SUB-CONTRACTORS ARE INCOME TAX ASSESSEE. ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 3 IN THE COURSE OF ASSESSMENT PROCEEDINGS APPELLANT FILED ALL THE INFORMATION REQUIRED BY AO AND PRODUCED CASH BOOK, LEDGER, JOUR NAL, BANK BOOK, STOCK REGISTER AND VOUCHERS WHICH TEST CHECKED BY AO. AP PELLANT DECLARED GP RATE OF 5.97%. THE AO REQUIRED APPELLANT TO EXPLAIN THE DEC LINE IN G.P. TO 5.97% FROM THE G.P. SHOWN AT 6.20% IN THE PRECEDING YEAR. APP ELLAN5T SUBMITTED THE COMPARATIVE CHART FOR PROFITS(PAGE 2 OF PAPER BOOK AND PAGE 2 OF ASSESSMENT ORDER). APPELLANT FURTHER EXPLAINED THAT THERE WAS PRICE RISE IN IRON & STEEL AND ZINC. (PAGE 2 OF PAPER BOOK AND PAGE 1 OF ASSESSMEN T ORDER AND SUBMITTED AS UNDER: MONTHLY WHOLESALE PRICE INDEX OF IRON & STEEL AND ZINC IS ALSO ENCLOSED AS N EVIDENCE WHICH SHOWS THAT THE SAME MATERIAL WH ICH COULD HAVE BEEN PURCHASED AT RS. 21.9 BASED ON INDEX VALUE IN POINTS) IN APRIL 2004 COULD BE PURCHASED FOR RS. 236/- (INDEX VALUE IN PO INTS) IN OCTOBER, 2004 AND FOR RS. 249.8 IN MARCH, 2005 AS EVIDENCED BY TH E WHOLESALE PRICE INDEX. SUCH TYPE OF ABNORMAL INCREASE IS NOT ANTICI PATED WHILE QUOTING THE TENDERS. THIS HAS RESULTED IN MARGINAL FALL IN G.P. RATIO. COMPLETE QUANTITATIVE DETAILS OF OPENING STOCK, M ATERIAL PURCHASED, MATERIAL SOLD AND CLOSING STOCK HAS BEEN MAINTAINED AND THE SAME HAS ALSO BEEN ENCLOSED WITH THE RETURN OF INCOME FILED. ALL THE ITEMS OF TRADING ACCOUNT ARE SUPPORTED BY BILLS. IN VIEW OF ABOVE, IT IS QUITE CLEAR THAT, DUE TO EXTRAORDINARY INCREASE IN THE RATE OF MATERIAL PURCHASED THE GP RATIO DECREASED BY 0.23% OVER THE PREVIOUS YEAR. SINCE THE COMPLETE DOCUMENTARY EVIDENCE IN SUPPORT OF ALL ITE MS OF TRADING ACCOUNT IS AVAILABLE AND ALL DOCUMENTARY EVIDENCE I S BEING PRODUCED/ SUBMITTED BEFORE YOUR HONOUR FOR YOUR KIND VERIFICA TION, NO ADVERSE INFERENCE OF THE FALL IN G.P. RATIO MAY KINDLY BE T AKEN AND THE G.P. RATE DECLARED BY THE BOOKS OF ACCOUNTS MAY KINDLY BE AC CEPTED. MAIN REASON FOR ALL THE N.P. RATIO WAS THAT DURING THE CURRENT YEAR THE GROSS SALES CAME DOWN BY RS. 182.89 LACS AS COMPARE D TO PREVIOUS YEAR WHEREAS THE FIXED EXPENSES INCREASED FROM RS. 28,62 ,899/- TO RS. 29,74,306/-. THUS THE EXPENSES TO SALES RATIO INCR EASED FROM 3.87% TO 5.34% RESULTING TO DECLINE IN NP RATIO. THE FIRM CANNOT AFFORD TO ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 4 DRASTICALLY CUT DOWN THE FIXED ADMINISTRATIVE EXPEN SES DESPITE FALL IN THE SALES AS IT HAS TO MAINTAIN THE SAME INFRASTRUCTU RE FACILITIES SO AS TO SERVICE LARGE ORDERS IN FUTURE. DUE TO MAINTAININ G THE LARGE SET UP FIRM COULD BE ABLE TO ACHIEVE LARGER TURNOVER IN THE F INANCIAL YEAR 2005-06 AND NP RATIO ALSO IMPROVED TO 4.79% IN THE FINANCIA L YEAR 2005-06. SINCE THE COMPLETE EXPENSES ARE BACKED BY DOCUMENTARY EVI DENCE AND ENTRIES IN REGULAR BOOKS OF ACCOUNTS , THE SAME MAY KINDLY BE ACCEPTED. NEITHER LD. AO NOR THE LD. CIT HAS CONTROVERTED THE ABOVE FACTUAL EXPLANATION AND DOCUMENTARY EVIDENCE PRODUCED BY TH E APPELLANT. ANOTHER REASON WHICH HAS BEEN MENTIONED BY THE AO DISPUTING THE PAYMENTS MADE TO LABOUR AND DIFFERENT SITES OF WORK . REASONS GIVEN IS THAT THE MUSTER ROLL AND PAYMENTS HAVE BEEN VERIFIED BY ONE EMPLOYEE SHRI K.C. GUPTA. APPELLANT HAS SUBMITTED THE EXPLANATION AS UNDER: SHRI K.C. GUPTA WAS OVER-ALL SITE IN-CHARGE FOR B OTH THE SITES. HE3 WAS ASSISTED BY DIFFERENT SUPERVISORS NAMELY SHRI SUNI L AND SHRI GIRISH MISHRA FOR RAJASTHAN AND MAHI SITES RESPECTIVELY. SINCE THESE SUPERVISORS WERE TEMPORARY STAFF ONLY AND OVERALL RESPONSIBILITY IN RESPECT OF THESE SITES LIED WITH SHRI K.C. GUPTA, SHRI K.C. GUPTA USED TO SIGN ON THE MUSTER R OLL SHEETS IN THE CAPACITY OF THE SITE IN-CHARGE AND ABOVE TWO PERSONS USED TO SU BMIT THE REPORT OF PAYMENT DULY SIGNED BY ALL THE LABOURER, SITE IN-CH ARGE WITH ATTENDANCE DULY FILLED IN AND MAINTAINED IN THE REGULAR COURSE OF B USINESS AS SUCH THE SAME MAY KINDLY BE ACCEPTED AS GENUINE AND THE PAYMENT TO LA BOUR MAY KINDLY BE ALLOWED. BOTH THE LD. LOWER AUTHORITIES HAVE NOT CONSIDERED AND APPRECIATED THAT BUSINESS WAS CONDUCTED BY THE APPELLANT IN THE NORM AL COURSE OF BUSINESS AND NOTHING UNUSUAL HAS BEEN FOUND BY THE AUTHORITIES. THERE IS NO FIND THAT PAYMENT MADE TO THE LABOUR WAS UNREASONABLE AS COMP ARED TO THE EXECUTION OF WORK. MERELY ON SURMISES THE BOOKS OF ACCOUNT C ANNOT BE REJECTED. THIRD GROUND HAS BEEN GIVEN BY THE AO REGARDING CO MPARISON OF G.P. RATE WITH SUB-CONTRACTOR. APPELLANT SUBMITTED EXPL ANATION FOR THE SAME BEFORE AO. REASONS GIVEN BY APPELLANT OBSERVATIONS OF AO ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 5 1.ADMITTEDLY IN THE OPEN TENDERS DUE TO COMPETITIO N FROM MANY PLAYERS IN THE MARKET THE RATE IS ALWAYS DOWN RESULTING INTO LOW G.P RATE. (THE ASSESSEE HA S EXECUTED ONLY OPEN TENDERS BY SELF). WHEREAS THE SPECIAL TENDERS ARE GIVEN TO SELECTED PARTIES ONLY AND IN THE CASE OF ASSESSEE THESE TENDERS WERE EXECUTE D BY SUB-CONTRACTORS. A.O. HAS NEITHER REFUTED NOR MAY ANY OBSERVATIONS IN THIS REGARD. 2. OUT OF TOTAL WORK EXECUTED BY SELF AGGREGATING TO RS. 2,19,07,938/- RECEIPTS OF RS. 80,37,509/- PERTA INS TO AHMEDABAD WORK AGAINST WHICH ONLY MATERIAL WAS SUPPLIED ON 11.3.05 AND 17,3,2005 AND THE EXECUTION AT SITE WAS PENDING AS ON 31.3.2005. THE EXECUTION WORK TOOK PLACE IN THE NEXT FINANCIAL YEAR 2005- 06. DUE TO INCREASE IN THE STEEL PRICES, THE WORK REL ATING TO SUPPLY OF MATERIAL RESULTED INTO LOWER GP. HOWEVER DUE TO EXECUTION OF WORK IN THE NEXT FINANCIAL YEAR, THE GP RATE ON SELF EXECUTED WORK INCREASED TO 11.92% THE FACT OF SUPPLIES MADE ON 11.3.05 AND 17.3.2005 WERE VERIFIABLE FROM THE BOOKS OF ACCOUNTS PRODUCED BEFORE THE ASSESSING AUTHORITY. THE AO HAS NOT DISPUTED THE FACTS. 3. OUT OF TOTAL WORK EXECUTED BY SELF AGGREGATING T O RS. 2,19,07,938/- WORKS OF TRS. 8,50,000/- WERE CONTRACT OF 2002 WHICH INVOLVED LOSS AS THE STEEL PRICES INCREASED BY MORE THAN 40% AS COMPARED TO THE PRICES PREVAILING IN THE YEAR 2002 WHEN THESE CONTRACTS/TENDERS WERE PROCURED. AO HAS STATED THAT PRICES HAVE INCREASED FOR THE SUB-CONTRACTORS ALSO. HE HAS NOT CONSIDERED THAT IN THE CASE OF APPELLANT THE CONTRACT WERE AWARDED IN THE YEAR 2002 AND IN THE CASE OF SUB CONTRACTOR THE CONTRACTS WERE AWARDED INSTANTLY BIN THE 2004. THE PRICE RISE HAS TAKEN PLACE IN BETWEEN THE PERIOD 2002 TO 2004 , THE REASONS MENTIONED ON PAGE 5 OF ASSESSMENT ORDE R ARE MERELY ON SURMISES, CONJECTURES, ASSUMPTION AND PRESUMPTIONS. AO HAS GIVEN MUCH RELIANCE ON THE SUB-CONTRACT OF SHRI D.C. MITTAL. HE HAS NOT APPRECIATED THE SUBMISSIONS OF THE APPELLANT THE CONTRACTS GIVEN ON SUB-CONTRACT ARE NOT ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 6 TENDER CONTRACT BUT ARE ALLOTTED CONTRACT AND THERE FORE MARGIN IS LESS. AO HAS ALSO NOT CONSIDERED THAT CONTRACT EXECUTED BY THE A PPELLANT WERE OLD CONTRACTS INCLUDING CONTRACT FOR AHMEDABAD OF2002 AND SUB-CO NTRACTED CONTRACT WAS INSTANT CONTRACT. THUS BOTH COULD NOT BE COMPARED . THE CIT HAS NOT PASSED A SPEAKING ORDER ON THE SUBMISSIONS AND EXPLANATIONS OF THE APPELLANT. HUMBLE APPELLANT PRAYS THAT TRADING RESULT DECLARED BY APPELLANT BE ACCEPTED AND ADDITION MAY PLEASE BE DELETED. GROUND NO. 2 TO 6 DISALLOWANCE IN THE EXPENSES: HUMBLE APPELLANT RESPECTFULLY SUBMIT THAT THE EXPEN SES INCURRED ARE GENUINE AND REASONABLE LOOKING TO THE NATURE AND QU ANTUM OF BUSINESS. LEARNED LOWER AUTHORITIES HAVE DISALLOWED THE PART OF EXPENSES WITHOUT ANY PROPER BASIS AND JUSTIFICATION. DISALLOWANCE MADE D ESERVES TO BE DELETED AND ALL THE EXPENSES DESERVED TO BE ALLOWED. 2.1 THELD.CIT(A) HAS GIVEN HIS FINDING IN HIS APPEL LATE ORDER DATED 31.1.2014 THAT CONSIDERING THE ABOVE AND THE FACT THAT THE ASSESSEE HAD SURRENDERED CASH CREDITS OF RS. 1,26,300/- IT CAN BE CONCLUDED THAT ASSESSEE WAS EARNING MORE THAN WHAT IT SHOWED. IT WAS ALSO SURPRISING T HAT ON THE SAME PROJECT SUBCONTRACTORS SHOWED MUCH HIGHER PROFIT (16.75% B Y DC MITTAL) EVEN AFTER SHARING PART OF THE PROFIT WITH ASSESSEE. THEREFOR E REJECTION OF BOOKS OF ACCOUNTS IS UPHELD. HOWEVER, THE AO IN A.Y. 2006-0 7 HAS ESTIMATED THE PROFIT @10% G.P. THEREFORE, IT WOULD BE FAIR TO APPLY G.P. RATE OF 10%. THIS RESULTS INTO ADDITION OF RS. 4,11,869/- (2190793-1778924). IN MY OPINION THE SURRENDERED CASH CREDITS WERE ALSO FROM THIS ADDIT IONAL PROFIT. THEREFORE I ALLOW TELESCOPING OF RS. 1,26,300/- SURRENDERED AS UNEXPLAINED CASH CREDITS. IN THE RESULT NET ADDITION OF RS. 2,85,569/- (41186 9-126300) IS CONFIRMED. THE AO IS DIRECTED TO DELETE ADDITION OF RS. 2,35,840/- . THIS GROUND OF APPEAL IS PARTLY ALLOWED. 2.2 THE GROUND NO.2 IS DISMISSED BY THE LD. CIT(A) . 2.3 THE GROUND NO.3, 20% DISALLOWANCE AMOUNTING TO RS. 11,814/- IS UPHELD AND THIS GROUND OF APPEAL IS THEREFORE, DISM ISSED. 2.4 THE GROUND NO.4 ADDITION OF RS. 8044/- MADE ON A/C OF TELEPHONE EXPENSES ARE HEREBY DELETED BY THE LD. CIT(A). ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 7 2.5 THE TRAVELLING AND CONVEYANCE EXPENSES A SUM O F RS. 15,000/- IS UPHELD AND THE BALANCE OF RS. 10,000/- IS HEREBY DELETED B Y THE LD. CIT(A). 2.6 IN DONATION A/C THE LD. CIT(A) HAS CONFIRMED THE ADDITION OF RS. 1100/- AND THIS GROUND IS DISMISSED. 2.7 THE LD. CIT(A) HAS CONFIRMED ADDITION OF RS. 973/- MADE BY AO ON ACCOUNT OF ESI & PF WITH OBSERVATION THAT THE ASSE SSEE IS NOT ENTITLED FOR DEDUCTION ON THIS ACCOUNT. 2.8 IN WELCOME EXPENSES A SUM OF RS. 2763/- IS UP HELD AND THE BALANCE OF RS. 2764/- IS HEREBY DELETED. A.Y. 2006-07 - THE APPELLANT HAS TAKEN FOLLOWING GROUNDS OF AP PEAL: (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) ERRED IN CONFIRMING THE TRADING ADDITION OF RS.3,64,677/- MA DE BY THE AO. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE , THE LD. CIT(A) ERRED IN MAKING FURTHER ENHANCEMENT OF RS.15,220/- TO THE T RADING ADDITION BY RS. 15220/- MADE BY THE AO. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE , THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.20,000/- OUT OF T HE DISALLOWANCE OF RS. 35,458/- MADE BY THE AO ON A/C OF TRAVELLING EXPEN SES. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE , THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2434/- ON A/C OF STAFF AND LABOUR WELFARE EXPENSES MADE BY THE AO. ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 8 (5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE , THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 2572/- ON ACCOUN T OF WELCOME EXPENSES MADE BY THE AO. (6) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE , THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 5430/- ON ACCOUN T OF FACTORY AND MESS EXPENSES MADE BY THE AO. 3. THE LD. AR IN HIS WRITTEN SUBMISSION HAS STATED THAT THE APPELLANT IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING/FABRICATION OF GLUED INSULATED RAIL JOINTS AND CHANNEL SLEEPER AND EXECUTING WORKS CONTRACT AWARDED BY RAILWAY FOR SUPPLY OF MATERIAL AND EXECUTION OF WORK THROUGH LABOUR EMPLOYED BY IT. APPELLANT DECLARED GROSS PROFIT OF RS.75,52,496/- ON THE TURNOVER OF RS.51,95,656/- RE SULTING IN G.P. RATE OF 8.86% AS COMPARED TO G.P. RATE OF 5.97% IN THE PRECEDING YEAR. DURING THE COURSE OF HEARING BEFORE AO APPELLANT P RODUCED ALL THE RECORDS AND SUBMITTED INFORMATION AS REQUIRED BY AO, AO RA ISED SIX OBJECTIONS 5REGARDING THE RECORDS PRODUCED BY THE APPELLANT IE.(I),(II),(V) PAYMENTS HAS BEEN MADE TO LABOURER ON THE BASIS OF MUSTROL AN D WAGE REGISTER IN WHICH FATHERS NAME AND ADDRESSES OF LABOUR ARE NOT MENT IONED, (II) NEITHER CLOSING STOCK NOR WORK IN PROGRESS HAS BEEN SHOWN, (III) & (VI) SOME OF VOUCHERS OF TRANSPORT EXPENSE WERE INTERNAL VOUCHERS IN WHICH C OMPLETE ADDRESS OF RECIPIENT IS NOT MENTIONED. APPELLANT SUBMITTED WRI TTEN REPLY ON 12.12.2008 BEFORE AO. AO DISAGREED TO THE CONTENTION OF THE APPELLANT AND INVOKED PROVISIONS OF SECTION 145(3) OF THE ACT AND APPLYING G.P. RATE OF 10% MADE A TRADING ADDITION OF RS. 3,64,677/-. BEING AGGRIEVED OF THE ORDER OF AO HUMBLE APPELLANT PREFERRED APPEAL BEFORE CIT(A). DETAILED SUBMISSIONS ON ALL THE ISSUES/GRO UNDS BY THE AO WERE SUBMITTED WRITTEN SUBMISSION ALONGWITH COPIES OF SU PPORTING DOCUMENTS BEFORE THE APPELLATE AUTHORITY. THE SAME ARE NOT R EPRODUCED HERE AGAINST AND IT IS, HUMBLY REQUESTED THAT THE SAME MAY PLEASE BE CONSIDERED HEREWITH AS PART OF THE WRITTEN SUBMISSIONS. CIT AT PAGE 17 OF THE APPELLATE ORDER HAS OBSERVED AS UNDER: ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 9 I HAVE GONE THROUGH ASSESSING OFFICERS FINDINGS A ND ASSESSEES SUBMISSIONS. I HAVE ALSO GONE THROUGH VARIOUS DETA ILS AND IT WAS SEEN THAT IN RELATION TO CONTRACT RECEIPTS ADK THE LAST BILL WAS RAISED IN NOVEMBER, 2005 BUT ASSESSEE HAS INCURRED EXPENSES OF RS. 4,57,897/- IN JANUARY, 2006. MOREOVER NIL CLOSING STOCK WAS SHOWN. THE ASSESSEE CLAIMED THAT LABOUR BILLS OF SEPTEMBER AND OCTOBER, 2005 WERE PAID IN JANUARY, 2 006. THE ASSESSEE WAS ASKED TO EXPLAIN HOW THE ASSESSEE TRACED THESE LABO URERS FOR MAKING PAYMENT WHEN THE PROJECT WAS OVER AND LABOUR HAS ALREADY LE FT THE SITE. THE ASSESSEE WAS ALSO ASKED TO PRODUCE LABOUR REGISTER OF JANUAR Y 2006 IF THE SAME LABOURERS WERE WORKING ON OTHER SITE. THE ASSESSEE SHOWED ITS INABILITY TO DO SO. THE ASSESSEE WAS ALSO ASKED TO GIVE MINIMUM CAS H BALANCE ON THE MONTH OF SEPTEMBER, OCTOBER, 2005. THE AR STATED THAT TH E SAME WAS AROUND RS. 78,000/- THEREFORE IT COULD BE CONCLUDED THAT ASSE SSEE MADE PAYMENT OF RS. 4,57,897/- TO THE LABOURERS IN THE MONTH OF SEPTE MBER, OCTOBER, 2005 BUT AS SUFFICIENT CASH WAS NOT AVAILABLE IN BOOKS IT WAS A CCOUNTED IN THE MONTH OF JANUARY, 2006. THE PAYMENT WAS PARTLY FROM UNACCOU NTED SOURCES (RS. 4,57,897/- RS.78,000 =3,79,897/- AND PARTLY FROM AV AILABLE CASH (RS.78,000/- CIT ISSUED NOTICE U/S 251(2) FOR ENHANCEMENT OF INC OME. FROM THE APPELLATE ORDER IT IS, APPARENT THAT APPE LLATE AUTHORITY HAS NOT NEGATIVE THE SUBMISSIONS OF THE APPELLANT DURING H EARING AND ALSO WRITTEN SUBMISSIONS . AO HAS SNOT DISPUTED THE TRADING REC EIPTS BY THE APPELLANT AND CIT APPEAL HAS ALSO ACCEPTED THE EXPENSES/PAYMENTS MADE TO THE LABOUR. THUS THERE IS NO DISPUTE REGARDING TRADING RESULT O R TRADING ADDITION. HOWEVER, CIT HAWS MADE OUT A NEW CASE OF PAYMENTS MADE FROM UNACCOUNTED SOURCES. HUMBLE APPELLANT SUBMITTED REPLY TO THE NOTICE PROP OSING ENHANCEMENT OF INCOME. HUMBLE APPELLANT SUBMITTED THAT CIT HAS NO JURISDICTION TO ENHANCE THE INCOME ON NEW GROUND. REFERENCE IN THIS REGARD MAY PLEASE BE MADE TO THE FOLLOWING JUDGEMENTS. CIT VS. ASSOCIATED GARMENTS MAKERS (1992) 197 ITR 3 50 (RAJ.) CIT VS. SARDARI LAL & CO.(2002)120 TAXMAN 595 (DELH I) (32001) 251 ITR 864 (DEL). CIT VS. UNION TYRES (1998) 240 ITR556 (DELHI AAC CANNOT DIRECT ENQUIRY REGARDING UN-EXPLAINED INVESTMENT. CIT VS. SHAPOORJI MISTRY PALLONJI (1962) 44 ITR 89 1(SC) ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 10 RAI BAHADUR HARDUTROY MOTILAL CHAMARIA (1967) 66 IT R 443 (SC) ADDL.CIT VS. GUJARGARAVURES P. LTD. (1978) 111ITR 1 (SC) CIT VS. NATIONAL COMPANY LTD. (1993) 199 ITR 445 (C AL.) HUMBLE APPELLANT PRAYS THAT TRADING ADDITION AND EN HANCEMENT OF INCOME MAY PLEASE BE SET ASIDE. GROUND NO. 3 TO 6 DISALLOWANCE OF EXPENSES. HUMBLE APPELLANT RESPECTFULLY SUBMIT THAT THE EXPE NSES INCURRED ARE GENUINE AND REASONABLE LOOKING TO THE NATURE AND QUANTUM OF BUSINESS. LEARNED LOWER AUTHORITIES HAVE DISALLOWED PART OF E XPENSES WITHOUT PROPER BASIS AND JUSTIFICATION. IN THIS REGARD DETAILED S UBMISSIONS, EXPLANATION AND DOCUMENTS ARE ON PAPER BOOK PAGE 12 TO 15 AND 26 TO 64 WHICH MAY PLEASE BE CONSIDERED. THE DISALLOWANCE MADE DESERVES TO BE D ELETED AND ALL THE EXPENSES DESERVES TO BE ALLOWED. 3.1 THELD.CIT(A) HAS GIVEN HIS FINDING IN HIS APPEL LATE ORDER DATED 31.1.2014 THAT CONSIDERING THE ABOVE I AM OF THE OPINION THA T ASSESSEE HAD ACTUALLY MADE THE PAYMENT IN SEPTEMBER, OCTOBER 2005 BUT TO AVOID NEGATIVE CASH BALANCE IT SHOWED THE SAME IN JANUARY, 2006. HOWEV ER, I ACCEPT THE ALTERNATE PLEASE OF ASSESSEE THAT ADDITION SHOULD BE RESTRICT ED TO NEGATIVE CASH ONLY. THEREFORE, AN ADDITION OF RS. 3,64,677/- IS CONFIRM ED WHICH RESULTS INTO ENHANCEMENT OF RS. 15,220/-. THIS GROUND OF APPEAL IS DISMISSED. 3.2 REGARDING GROUND NO.2, CONSIDERING THE FACTS OF THE CASE AND NO N VERIFIABLE NATURE OF TRAVELLING AND CONVEYANCE EXPE NSES SOME DISALLOWANCE WAS CONSIDERED JUSTIFIED. HOWEVER, THE SAME HAS TO BE REASONABLE. CONSIDERING THE FACTS OF THE CASE, IN MY OPINION A DISALLOWANCE OF RS. 20,000/- OUT OF TRAVELLING AND CONVEYANCE EXPENSES IS CONSID ERED REASONABLE. THEREFORE THE DISALLOWANCE OF RS. 20,000/- IS UPHELD AND THE BALANCE DISALLOWANCE OF RS. 15,458/- IS DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 3.3 REGARDING GROUND NO.3, CONSIDERING THE FACTS OF THE CASE IN MY OPINION A DISALLOWANCE OF 10% OF THE LABOUR EXPENSES IS CONSI DERED REASONABLE, THEREFORE, THE DISALLOWANCE OF RS. 2434/- IS UPHELD . THIS GROUND OF APPEAL IS DISMISSED. ITA NO. 268 & 269/JP/14 M/S DYNAMIC ENGINEERS, KOTA VS. DCIT, CIRCLE-1, KOT A 11 3.4 THE LD. CIT(A) HAS DELETED THE ADDITION OF RS. 10,797/- ON A/C OF TELEPHONE EXPENSES MADE BY THE AO. 3.5 THE LD. CIT(A) HAS UPHELD THE ADDITION OF RS. 2 ,572/- ON A/C OF WELCOME EXPENSES MADE BY THE AO. THIS GROUND OF APPEAL IS DISMISSED. 3.6 THE LD. CIT(A) HAS UPHELD RS. 5430/- (10%) IS UPHELD ON ACCOUNT OF MESS. EXPENSES ADDITION MADE BY THE AO. THIS GROUND OF APPEAL IS DISMISSED. IN THE RESULT THE APPEAL FILED BY THE ORDER PRONOUNCED IN THE OPEN COURT ON /04/ 2016. ( R.P. TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- / 04 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S DYNAMIC ENGINEERS, KOTA 2. THE RESPONDENT-THE DCIT, CIRCLE-1, KOTA 3. THE CIT(A) KOTA 4. THE CIT KOTA 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO SA NO.268 & 269 /JP/14) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR