MEASEG RAJA & COMPANY, SRINAGAR V. INCOME TAX OFFICER WARD 3(5), BARAMULA

ITA 27/ASR/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6333 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: TM
• Assessment Year: 2013-2014
• Appeal Filed On: 22-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M A MIR COST ACCOUNTANT
• Keywords: Unexplained cash credit; Rejection of books of accounts; Business income; Income from undisclosed sources; Source of fund; Difference of opinion; Reason to believe; TDS; Set aside; FORM 26AS
• Section: 143(3); 133(6); 194C; 143(1); 13; 145(3); 22; 255(4)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENC H, AMRITSAR BEFORE: SHRI. N.K.SAINI, VICE PRESIDENT (THIRD MEMBER) ITA NOS.27/ASR/2018 ASSESSMENT YEAR : 2013-14 M/S RAJA & CO. PAHLI PORA, URI, BARAMULLA VS THE ITO WARD 3(5) BARAMULLA PAN NO: AAE FR9964N APPELLANT RESPONDENT ASSESSEE BY : M.A.MIR, COST ACCOUNTANT REVENUE BY : SHRI CHARAN DASS, SR. DR DATE OF HEARING : 14/10/2019 DATE OF PRONOUNCEMENT : 09/01/2020 / // / ORDER PER N.K. SAINI, VICE PRESIDENT ON ACCOUNT OF DIFFERENCE OF OPINION IN BETWEEN THE LD. ACCOUNTANT MEMBER AND LD. JUDICIAL MEMBER OF THE ITAT, AMRITSA R BENCH, THIS MATTER HAS BEEN REFERRED TO ME BY THE HON'BLE PRESIDENT ITAT F OR CONSIDERATION AND DISPOSAL UNDER SECTION 255(4) OF THE INCOME TAX ACT, 1961 (H EREINAFTER REFERRED TO AS ACT). IT MAY BE NOTED THAT EVEN WHILE FRAMING THE POINT OF DIFFERENCE THERE WAS A DIFFERENCE OF OPINION AND DIFFERENT QUESTIONS HAVE BEEN FRAMED BY BOTH THE LD. MEMBERS. HON'BLE JUDICIAL MEMBER FORMULATED THE FOLLOWING QUESTIONS: WHETHER THE LD. CIT(A) ERRED IN LAW AND FACTS IN AFFIRMING THE REJECTION OF BOOKS OF ACCOUNT U/S 145(3) BY THE ASSESSING OFFICER ? 2. ON THE OTHER HAND THE LD. ACCOUNTANT MEMBER FORM ULATED THE FOLLOWING QUESTIONS WHILE REFERRING THE MATTER TO THE HON'BLE PRESIDENT. WHETHER THE BOOKS OF ACCOUNT OF THE ASSESSEE FIRM ARE CORRECT AND COMPLETE, REFLECTING THE TRUE AND CORRECT INCOME OF ITS BUSIN ESS FOR THE RELEVANT YEARS, OR IS 2 THE SAME LIABLE TO BE DETERMINED IN ACCORDANCE WITH S. 145(3) OF THE INCOME TAX ACT, 1961? 3. FROM THE AFORESAID QUESTIONS REFERRED BY BOTH TH E LD. MEMBERS IT WOULD BE CLEAR THAT THE ONLY ISSUE TO BE ADJUDICATED RELA TES TO THE DETERMINATION OF THE BUSINESS INCOME IN ACCORDANCE WITH THE BOOKS OF ACCOUNT OR BY REJECTING THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE AC T. ALTHOUGH THE FACTS HAS BEEN NARRATED BY BOTH THE LD. MEMBERS IN THEIR RESP ECTIVE ORDERS, FOR THE CLARITY IT IS NECESSARY TO DISCUSS THE FACTS IN BRIEF AS ME NTIONED BY THE A.O. IN THE ASSESSMENT ORDER DT. 31/03/2016. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE ELECTRO NICALLY FILED ITS RETURN OF INCOME ON 30/09/2013 BY DECLARING THE INCOME OF RS. 11,30,820/-, SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSEE IS A PARTNERSHIP FIRM HAVING HEAD OFFICE AT URI AND BRANCH OFFICE AT RAWALPORA H OUSING COLONY, SRINAGAR AND WAS DERIVING ITS INCOME FROM EXECUTION OF CIVIL CONTRACT WORKS ALLOTTED TO IT BY AFCONS INFRASTRUCTURE LTD., FLOOD CONTROL DIVISI ON AND PMGSY DEPARTMENTS OF J&K GOVERNMENT. THE CONTRACT WORKS HAD BEEN EXECUTE D AT DIFFERENT PLACES IN UDHAMPUR, SAMBA AND BARAMULLA AREAS. THE GROSS CONT RACT RECEIPT DECLARED BY THE ASSESSEE WAS AT RS. 16,04,33,627/- BESIDES T HE OTHER INCOME OF RS. 20,30,658/- WHICH HAD BEEN CREDITED IN THE P&L ACCO UNT. THE ASSESSEE HAD SHOWN NET PROFIT OF RS. 11,30,820/- I.E. @ 0.69% AF TER ALLOWING DEDUCTION ON ACCOUNT OF SALARY AND INTEREST TO THE PARTNERS AND THE NET PROFIT RATE BEFORE THE SAID DEDUCTIONS WAS AT 1.83% . THE ASSESSE HAD EXEC UTED HEAVY WORK CONTRACT IN J&K REGIONS AT SEPARATE AND DISTANT PLACES FROM SRINAGAR. 5. THE A.O. REQUIRED THE ASSESSEE TO PRODUCE THE SI TE/PROJECT WISE BOOKS OF ACCOUNTS AND OTHER SUBSIDIARY RECORDS. THE ASSESSEE ADMITTED TO HAVE NOT MAINTAINED SUCH SEPARATE BOOKS OF ACCOUNTS. THE A.O . ALSO REQUIRED THE ASSESSEE TO GIVE THE DETAILS OF THE CONTRACT RECEIP T AND IDENTIFY THE SAME FROM THE BOOKS OF ACCOUNTS IN VIEW OF THE MISMATCH OBSER VED VIS A VIS THE DETAILS IN 3 FORM 26AS AND FORM NO. 16A. THE ASSESSEE SUBMITTED THAT THE RECEIPTS WERE PROPERLY REFLECTED IN FORM NO. 26AS. THE A.O. HOWEV ER OBSERVED THAT THE ASSESSEE HAD NOT MENTIONED PROPER DETAILS AND WAS N OT SURE OF THE NATURE AND PARTY IN RESPECT OF THE CONTRACT RECEIPTS SHOWN IN ITS BOOKS OF ACCOUNTS. THE A.O. POINTED OUT THAT THE ASSESSEE HAD SHOWN GROSS CONTR ACT RECEIPT TO THE TUNE OF RS 16,04,33,627/- WHEREAS THE SAME CAME TO RS. 11,90,1 9,320/- AS PER THE FORM NO. 26AS. THE ASSESSEE GAVE THE DETAILS OF THE TOTAL CO NTRACT RECEIPT AS UNDER: ALLOTTING AUTHORITY GROSS CONTRACT AMOUNT AMOUNT RECEIVED DURING THE F.Y. %AGE OF COMPLETED WORK BILL RAISED BUT NOT COMPETED WIP & MATERIAL AT SITE AFCONS INFRASTRUCTURE LTD. 62133353/- 4618840/- 3.04 NIL NIL FLOOD CONTROL DEPT. 93600000/- 6804750/- 4.48 323370 NIL PMGSY 103148023 6548510/- 4.31 NIL NIL 5.1 THE A.O. OBSERVED THAT THE DETAILS OF THE CONTR ACT RECEIPT SHOWN WERE NOT RECONCILING, HE THEREFORE ASKED THE ASSESSEE TO GIV E THE PROJECT WISE DETAILS. IN RESPONSE THE ASSESSEE SUBMITTED AS UNDER: FLOOD CONTROL DIVISION RS. 29663028/- PMGSY RS. 52609033/- AFCONS RS. 78161566/- 5.2 THE A.O. POINTED OUT THAT THE CONFIRMATIONS OF THE RECEIPT & TDS THEREON WERE CALLED FROM THE RESPECTIVE DEPARTMENT AND IT W AS FOUND THAT PAYMENTS FROM FLOOD CONTROL DIVISION WAS AT RS. 66,413,499/ - AND ALSO THERE HAD BEEN A MISMATCH OF FIGURES ON RECEIPTS FROM AFCONS AS REPO RTED IN BOOKS OR DETAILS FURNISHED AND AS CONFIRMED BY AFCONS. 4 5.3 THE A.O. FURTHER OBSERVED THAT THE ASSESSEE IN ITS ACCOUNT HAD CREDITED AMOUNTS AT DIFFERENT TIME UNDER THE HEAD MISC. INCO ME. HE THEREFORE ASKED THE ASSESSEE TO PROVIDE THE DETAILS OF THE SUCH CREDITS / RECEIPTS. THE ASSESSEE SUBMITTED THAT THE SAME REPRESENTED SALE OF SCRAP / LEFT OUT MATERIAL AND INTEREST INCOME. 5.4 THE A.O. OBSERVED THAT THE ASSESSEE HAD NOT FUR NISHED ANY REASONABLE DETAILS OR DOCUMENTARY EVIDENCE TO VERIFY THE NATUR E AND SOURCE OF THESE HEAVY CREDITS IN ITS BANK ACCOUNT / BOOKS AND FAILURE TO ESTABLISH THE NATURE OF BEING CONTRACT RECEIPTS OR OTHERWISE OF THOSE CREDITS COU LD NOT BE VERIFIED DUE TO ASSESSEES FAILURE AND THEREFORE GAVE STRONG REASON TO BELIEVE THAT THE SAME REPRESENTED THE RECEIPTS FROM UNDISCLOSED SOURCES. 5.5 THE A.O. ALSO OBSERVED THAT THE ASSESSEE DID NO T PRODUCE PROPER AND COMPLETE BOOKS OF ACCOUNTS OR SUPPORTING VOUCHERS I N RESPECT OF THE VARIOUS CONTRACTS EXECUTED AT DISTANT PLACES ACROSS THE STA TE, BESIDES SOME OTHER DISCREPANCIES WERE NOTICED ON EXAMINATION OF THE DE TAILS / ACCOUNT BOOKS PRODUCED WHICH WERE CLEARLY SUGGESTING THE INCOMPLE TENESS OF THE BOOKS OF ACCOUNTS. HE THEREFORE ASKED THE ASSESSEE TO EXPLAI N AS TO WHY THE TRADING / BOOK VERSION SHOWN IN THE RETURN BE NOT REJECTED AF TER INVOKING THE PROVISIONS OF 145(3) OF THE ACT, AND THE INCOME TO BE DETERMINED AT A HIGHER PROFIT RATE AS CONSIDERED REASONABLE IN THE CONTRACT CASES. THE A. O. ISSUED THE LETTER DT. 29/02/2016 TO THE ASSESSEE, THE RELEVANT PORTION OF WHICH READ AS UNDER: 1. YOU HAVE CLAIMED HEAVY CONTRACT RECEIPTS AND TDS TH EREON WHICH ARE NOT FULLY REFLECTED IN THE F.NO 26AS.TIME AND AGAIN YOU WERE REQUESTED TO FURNISH DATE WISE AND CONTRACTING DEPARTMENT/COMPANY WISE D ETAILS OF THE CONTRACT RECEIPTS AND TDS THEREON. IN YOUR REPLIES SO FAR, Y OU HAVE GIVEN VARYING EXPLANATIONS. FIRST YOU RELIED UPON THE 26AS BUT TH AT IS MATCHING. IN ONE OF YOUR REPLIES DATED 15.9.15 YOU STATED THE TOTAL RECEIPTS DURING THE YEAR AT RS. 1797200/ ONLY. LATER ONE MORE CHART OF THE DETAILS WERE GIVE N WHICH ARE ALSO NOT RECONCILE E,G. THE RECEIPTS FROM FLOOD CONTROL DEPARTMENT SHO WN AT RS. 29663028/ WHEN SAME HAVE BEEN CONFIRMED AT RS. 66413499/. YOUR FAI LURE TO FURNISH DATE WISE AND CONTRACT WISE DETAIL S OF THE RECEIPTS DESPITE GIVING REASONABLE TIME CL EARLY SUGGEST THAT SUCH DETAILS ARE NOT AVAILABLE WITH YO U AND POINTS TOWARDS THE 5 INCOMPLETENESS OF THE BOOKS OF ACCOUNTS MAINTAINED AND RELIED IN THE RETURN OF INCOME. 2. TILL DATE YOU HAVE NOT FURNISHED DETAILS REGARDING THE NATURE AND SITES OF THE CONTRACTS EXECUTED . SINCE IT APPEARS THAT THE WORK S HAVE BEEN EXECUTED IN REMOTE AND DISTANT AREAS LIKE URI, SAMBA AND UDHAMP UR AREAS, IT IS CLEAR THAT SITE WISE AND PROJECT /CONTRACT WISE ACCOUNTS WERE REQUI RED TO BE MAINTAINED. NO PROJECT /CONTRACT WISE DETAILS AND ACCOUNT BOOKS HA VE BEEN PRODUCED SO FAR DESPITE SPECIFIC REQUEST FOR THE SAME. IT APPEAR FR OM THE FAILURE TO FURNISH SUCH PROJECT WISE BOOKS OF ACCOUNTS AND OTHER SUBSIDIARY RECORDS THAT SUCH ACCOUNTS HAVE NOT BEEN MAINTAINED AND THIS CAST DOUBT ON THE CORRECTNESS OF THE FINAL TRADING RESULTS DECLARED. 3. TILL DATE COMPLETE PAYMENT VOUCHERS IN RESPECT OF T HE EXPENSES HAVE NOT BEEN PRODUCED . IN ABSENCE OF THE SUPPORTING DOCUME NTARY EVIDENCE FOR THE EXPENSES CLAIMED AGAINST THE GROSS RECEIPTS TO SHOW PROFITS AT A MEAGER NP RATE OF 0.69%,THE CORRECTNESS AND GENUINENESS OF THE EXP ENSES CLAIMED IS NOT VERIFIABLE AND PROVIDES ANOTHER GROUND FOR INCOMPLE TENESS OF THE BOOK VERSION . 4. NO WORK IN PROGRESS OR BILLS RECEIVABLE HAVE BEEN S HOWN IN THE ACCOUNTS .IN VIEW OF THE LARGE SCALE CONTRACT WORKS THAT TOO AT VARIOUS SITES INCLUDING IN SUMMER ZONE UDHAMPUR AND SAMBA, THERE IS A STRONG P OSSIBILITY OF SUCH WORK IN PROGESS OR MATERIAL AT SITE WHICH HAS NOT BEEN SHOW N. FURTHER SOME BILLS PRESENTED BUT NOT CLEARED TILL 31.3.2013 CANNOT BE RULED OUT BUT NO SUCH BILLS RECEIVABLE SHOWN. 5. YOU HAVE SHOWN BANK ACCOUNT NO. 1154 IN THE RETURN. IN YOUR REPLIES YOU HAVE NOT CLAIMED ANY SUCH ACCOUNT. YOU CLAIMED ONLY FOUR BANK ACCOUNTS BUT WHEN LATER CONFRONTED, YOU ADMITTED ANOTHER BANK ACCOUNT WITH STATE COOPERATIVE BANK NOT EARLIER ADMITTED. NO LEDGER ACCOUNT OF THI S UCCOUNT PROVIDED AND APPARENTLY THE ACCOUNT WAS NOT ACCOUNTED FOR WHICH CLEARLY POINT TOWARDS INCOMPLETENESS OF THE BOOKS OF ACCOUNT MAINTAINED A ND RELIED UPON. 6. FOR A PRETTY LONG TIME YOU DENIED TO HAVE ANY FDR B UT LATER WHEN CONFRONTED, YOU ADMITTED TO HAVE A BANK FDR ,HOWEVER NO DETAILS PROVIDED ABOUT IT, WHICH CLEARLY SUGGESTS THE INCOMPLETENESS OF THE ACCOUNTS . 7. YOU HAVE CREDITED RS.2030658/- IN THE P&L ACCOUNT. NO SPECIFIC DETAILS IN THIS REGARD PROVIDED DESPITE REPEATED REQUESTS AND IS ST ATED AS SALE OF SCRAP ETC. THE FAILURE TO GIVE DETAILS IN THIS REGARD MEANS THAT R ELEVANT DETAILS ARE NOT AVAILABLE AND THUS QUESTION THE COMPLETENESS OF THE ACCOUNTS. 8. BESIDES ABOVE, IT IS NOTICED THAT YOU HAVE EITHER F AILED TO DEDUCT TAX AT SOURCE OR DEDUCTED IT PARTLY IN RESPECT OF THE FOLL OWING PAYMENTS ATTRACTING TDS PROVISIONS; I) COMMISSION NO TDS MADE II) HIRE CHARGES ONLY TDS 1% IS STATED TO HAVE BEEN MADE ALTHOUGH RELEVANT DETAILS OF THE DATE WISE PAYMENTS AND TDS THEREON N OT PROVIDED. 6 III) WAGES AND LABOUR- IN VIEW OF THE LARGE SCALE C ONTRACTS AT VARIOUS PLACES, THE ENGAGEMENT OF LABOUR MAT IS NOT RULED OUT ESPECIALL Y NO MUSTER ROLLS OF THE LABOUR USED NOT PROVIDED DESPITE SPECIFIC REQUESTS. IV) RELEVANT DETAILS OF DEDUCTEES WITH THEIR PANS A ND E-TDS RETURNS IN RESPECT OF TDS MADE ON PAYMENTS TO SUB CONTRACTORS ALSO NOT PROVIDED FOR VERIFYING THE CORRECT COMPLIANCE TO THE TDS PROVISIONS. V) IN HEAVY CLAIM OF SALARIES, PAYMENT OF SALARY TO ENGINEERS ATTRACTING TDS , CANNOT BE RULED OUT BUT SAME IS NOT ASCERTAINABLE F OR WANT OF RELEVANT DETAILS NOT PROVIDED SO FAR. 9. COPIES OF TWO PARTNERSHIP DEEDS HAVE BEEN PRODUC ED .AS PER PS.DEED DATED 1.4.2006 THERE ARE ONLY 4 PARTNERS , AS PER S UPPLEMENTARY PS DEED THERE ARE 9 PARTNERS AND ONE ZUHAIB TANVEER KHAN, IS RETI RING. THERE IS NO EVIDENCE OF ADDING MORE PARTNERS OR ANY JUSTIFICATION FOR CLAIM ING INTEREST AND SALARY PAID TO THE RETIRING PARTNER FROM YOUR SIDE. FROM THE ABOVE DISCREPANCIES AND OBSERVATION , I AM OF THE OPINION THAT THE BOOKS OF ACCOUNTS MAINTAINED DO NOT PRESENT A CLEAR PICTURE OF YOUR INCOME AND ARE NOT RELIABLE. ACCORDINGLY THE TRADING /BOOK VER SION SHOWN IN THE RETURN OF INCOME ON THE BASIS OF SUCH INCOMPLETE BOOKS OF ACC OUNTS IS LIABLE FOR REJECTIONS. ACCORDINGLY FOR THE ABOVE REASONS AND DISCREPANCIES , IT IS PROPOSED TO REJECT YOUR BOOK VERSION BY INVOKING THE PROVISIONS OF SEC TION 145(3) OF THE INCOME TAX ACT,1961 AND ASSESS YOUR INCOME BY APPLYING A HIGHE R NET PROFIT RATE AS HAS BEEN CONSIDERED REASONABLE IN CONTRACTOR CASES BY MANY A PPELLATE AUTHORITIES. HOWEVER, BEFORE PROCEEDING TO COMPLETE YOUR ASSESSM ENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IN THE MANNER PROVIDED U/S 145(3)/144, YOU ARE REQUESTED TO FURNISH YOUR EXPLANATION DULY SUPPORTE D BY THE DOCUMENTARY EVIDENCE AND RECORDS. 5.6 IN RESPONSE THE ASSESSEE FURNISHED THE WRITTEN REPLY WHICH WAS RECEIVED BY THE A.O. ON 18/03/2016, IN THE MEANWHILE THE ASSESS EE MADE AN APPLICATION UNDER SECTION 144A OF THE ACT TO THE ADDITIONAL CIT RANGE-3, SRINAGAR WHO DIRECTED THE A.O. VIDE ORDER NO. 921 DT. 28/03/2016 AS UNDER: ASSESSMENT HAS TO BE FRAMED BY A.O TAKING INTO CONSIDERATION THE INCOME AND EXPENDITURE RETURNED B Y THE ASSESSEE , SO ASSESSEE CANNOT CLAIM PARTICULAR RATE OF NET PROFIT BE APPLI ED TO ITS CASE . HOWEVER TAKING INTO CONSIDERATION ALL THE FACTS AND FIGURES OF THE CASE , A.O MAY ALSO CONSIDER THE RATES OF INCOME OFFERED BY ASSESSEE AS ABOVE.' 5.7 THE A.O. AFTER CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE AND THE DIRECTION GIVEN BY THE ADDL. CIT OBSERVED AS UNDER: 7 I. THAT THE ASSESSEE HAS NOT MAINTAINED PROPER RECORDS IN RESPECT OF THE GROSS CONTRACT RECEIPTS AND HAS NOT BEEN ABLE TO GI VE CORRECT AMOUNT RECEIVED FROM THE RESPECTIVE CONTRACTING DEPARTMENTS . II. THAT THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE NATURE AND SOURCE OF LARGE RECEIPTS INTRODUCED IN THE BOOKS AS MISCELLAN EOUS INCOME AND CLUBBED THE SAME WITH THE CONTRACT RECEIPTS. III. THAT THE ASSESSEE HAS NOT MAINTAINED PROJECT WISE, SITE WISE BOOKS OF ACCOUNTS AND SUBSIDIARY RECORDS WHICH WAS REQUIRED TO BE MAINTAINED IN VIEW OF THE DISTANT SITE OF OPERATION AT UDHAMPUR , SAMBA A ND URI AND IT WAS NOT PRACTICALLY POSSIBLE TO MAINTAIN SINGLE SET' OF BOO KS OF ACCOUNTS FOR SUCH CONTRACT WORKS IN DIFFERENT TOPOGRAPHICAL REGIONS AT SINGLE PLACES ACCOUNTING OF THE FINANCIAL AFFAIRS . IV. THAT THE ASSESSEE DID NOT PRODUCE COMPLETE VOUCHERS IN SUPPORT OF THE LARGE EXPENSES BOOKED AGAINST THE GROSS RECEIPTS TO JUSTIFY THE NEGLIGIBLE NET PROFIT RATE OF 0.69% DECLARED . V. THAT THE ASSESSEE HAS NOT SHOWN ANY WORK IN PROGRESS OR BILLS RECEIVA BLES AT THE VARIOUS SITES OF OPERATION /CONTRACTS WHEN I T HAS ADMITTED THE SINGLE DIGIT PERCENTAGE OF COMPLETION OF THE CONTRACT ALLOTTED. VI. THAT THE ASSESSEE FOR A PRETTY LONG TIME ADMITTED ONLY ONE BANK ACCOU NT BEARING NUMBER 1154 AND THE DETAILS OF BANK ACCOUNTS WITH STATE COOPERATIVE BANK WAS NOT PROVIDED TO AVOID ENQUIRY ABOUT ITS CR EDITS. VII. THAT IN MANY REPLIES THE ASSESSEE DID NOT ADMITTED ANY FDR AND IT WAS ONLY WHEN CONFRONTED ON THE ISSUE ADMITTED THAT AN FDR OF RS 1 CRORE AND CLAIMED TO HAVE SHOWN THE SAME AS LOAN , ADVANCES AND DEPOSITS IN THE BALANCE SHEET, HOWEVER NO RELEVANT DETAILS OF THE P URCHASE DATE , THE INTEREST EARNED ETC HAVE BEEN PRODUCED. VIII. THE ASSESSEE HAS CLAIMED LABOUR & WAGES TO THE TUNE OF RS 579652 1/- AGAINST THE GROSS RECEIPTS AND NO DETAILS LIKE MUST ER ROLLS HAVE BEEN PRODUCED TO JUSTIFY THE SUCH LARGE CLAIM . FURTHER IN VIEW OF THE LARGE CLAIM IT DOES NOT APPEAR POSSIBLE THAT SUCH LARGE MANPOWE R /LABOURERS HAVE BEEN ARRANGED WITHOUT THE SERVICES OF MATE AND THUS THE PAYMENTS MADE ARE COVERED UNDER 194C OF THE INCOME TAX ACT,1961. IX. THAT ON PERUSAL OF THE DETAILS/RECORDS IT HAS BEEN NOTICED THAT ASSESSEE HAS ALSO ERRED PROPER COMPLIANCE OF TDS PROVISIONS AS HAS BEEN CONFRONTED TO IT VIDE THE LETTER DATED 29.02.2016. X. THAT THE ASSESSEE HAS ALSO BEEN FOUND CLAIMING SALARY TO EVEN SOME RETIRED PARTNERS WHICH WAS DULY CONFRONTED TO THE ASSESSEE VIDE LETTER DATED 29.02.2016 . 5.8 IN VIEW OF THE AFORESAID OBSERVATIONS, THE A.O. WAS OF THE VIEW THAT THE BOOKS OF ACCOUNTS MAINTAINED / PRODUCED BY THE ASSE SSEE WERE NOT COMPLETE 8 AND THOSE DID NOT GIVE A TRUE PICTURE OF THE PROFIT S, THEREFORE TRADING / BOOK RESULT OF THE ASSESSEE WERE NOT RELIABLE AND LIABLE FOR REJECTION. ACCORDINGLY THE A.O. INVOKED THE PROVISIONS OF SECTION 145(3) OF TH E ACT AND THE BOOK VERSION OF THE ASSESSEE WAS REJECTED. THE A.O. OBSERVED THAT T HE NET PROFIT RATE OF 10% HAD BEEN CONSIDERED A REASONABLE NET PROFIT RATE IN THE CASE OF CONTRACTORS BY VARIOUS APPELLATE AUTHORITIES. AT THE SAME TIME HE OBSERVED THAT ALTHOUGH NET PROFIT RATE OF 10% WAS CONSIDERED TO BE REASONABLE IN CONTRACTOR CASES, HOWEVER, AFTER CONSIDERING THE SUBMISSIONS OF THE A SSESSEE AND THE NATURE OF CIVIL CONTRACT WORKS, IT WOULD BE FAIR AND JUST IF A NET PROFIT RATE OF 8% WAS TO BE APPLIED ON THE GROSS CONTRACT RECEIPT TO ESTIMATE A ND ASSESS THE INCOME OF THE ASSESSEE FROM CONTRACT BUSINESS. THE A.O. ON THE BA SIS OF THE INFORMATIONS CALLED FOR, UNDER SECTION 133(6) OF THE ACT FOUND THAT THE ASSESSEE HAD RECEIVED GROSS CONTRACT RECEIPT OF RS. 13,65,47,363/- FROM THE FOL LOWING PARTIES: NAME OF THE PARTY AMOUNT TDS PMGSY RS. 20211620/- RS. 795779/- FLOOD CONTROL DEPTT/BARAMULLA RS. 32527923/- RS. 699162/- FLOOD CONTROL DEPTT/SAMBA RS. 33885576/- RS. 769204 /- AFCONS RS. 49922244/- RS. 998450/- TOTAL RS. 13,65,47,363/- RS. 32,62,595/- THE A.O. CONSIDERED THE ABOVE SAID CONTRACT RECEIPT S OF RS. 13,65,47,363/- AS AGAINST RS. 16,24,64,285/- SHOWN BY THE ASSESSEE AN D BY APPLYING THE NET PROFIT RATE OF 8% DETERMINED THE INCOME AT RS. 1,09,23,810 /- AS AGAINST RS. 11,30,820/- SHOWN BY THE ASSESSEE THEREBY RESULTING IN ADDITION OF RS. 97,92,990/-. THE A.O. ALSO OBSERVED THAT THE ASSESSEE HAD SHOWN OTHER INC OME OF RS. 20,30,658/-, HOWEVER THE NATURE AND SOURCE OF RECEIPT / DEPOSITS /CREDITS IN THE BANKS/BOOKS OF ACCOUNTS WAS NOT CLEAR DUE TO THE FAILURE OF ASS ESSEE TO FURNISH THE RELEVANT DETAILS. THE A.O. ALSO OBSERVED THAT THE ASSESSEE HAD SHOWN TOTAL CONTRACT RECEIPT AT RS. 16,47,86,685/- WHEREAS THE SAME HAD BEEN CONFIRMED AT RS. 13,65,47,363/- 9 THEREBY IN EXCESS BY RS. 2,82,39,322/-. ACCORDING T O THE A.O THE SAID EXCESSIVE RECEIPTS WERE APPARENTLY EITHER UNEXPLAINED CASH CR EDIT OR RECEIPTS FROM SOME UNKNOWN AND UNDISCLOSED SOURCE OF INCOME, HE, THERE FORE TREATED THE OTHER RECEIPTS OF THE ASSESSEE AT RS. 3,02,69,980/- (RS. 28239322 + RS 2030658). THE A.O. OPINED THAT THE ASSESSEE WOULD HAVE REASONABLY EARN ED PROFIT @ 15% ON THE AFORESAID RECEIPTS. HE THEREFORE BY APPLYING THE NE T PROFIT RATE OF 15% ON THE SAID RECEIPTS DETERMINED THE INCOME AT RS. 45,40,49 7/-. THE A.O. ALSO OBSERVED THAT THE ASSESSEE WAS HAVING FDR FOR RS. 1,00,00,00 0/- THE DETAILS OF WHICH WERE NOT GIVEN AND NOR THE DETAILS OF INTEREST ACCRUED / EARNED ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS WERE FURNISHED. HE THEREFORE BY T AKING INTO CONSIDERATION THE PREVAILING OPEN MARKET INTEREST OF 9%, ESTIMATED T HE INCOME AT RS. 9,00,000/-. ACCORDINGLY THE TOTAL TAXABLE INCOME WAS DETERMINE D AT RS. 16364310/- INSTEAD OF RS. 11,30,820/- SHOWN BY THE ASSESSEE. 6. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND CHALLENGED THE REJECTION OF BOOKS OF ACCOUNTS. IT W AS SUBMITTED BEFORE THE LD. CIT(A), THAT THE ASSESSEE HAD ACCOUNTED FOR MORE CO NTRACT RECEIPTS THAN CONTRACT PAYMENT DISCLOSED IN FORM NO. 26AS. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE EARNED INCOME TO THE TUNE OF RS. 20,30,658 /- ON ACCOUNT OF SALE OF SCRAP AND BANK INTEREST AND THAT THE REPLY WAS FURN ISHED TO THE SHOW CAUSE NOTICE SEEKING REJECTION OF BOOKS OF ACCOUNTS, BY S PEED POST WHICH WAS RECEIVED BY THE A.O. ON 18/03/2016 AND PLACED ON RE CORD. IT WAS STATED THAT THE A.O. DID NOT CONTRAVENE THE SUBMISSIONS MADE BY THE ASSESSEE. 6.1 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE AND THE ASSESSMENT ORDER PASSED BY THE A.O, OBSERVED THAT D ESPITE SUFFICIENT OPPORTUNITY THE ASSESSEE DID NOT PRODUCE PROPER AND COMPLETE BOOKS OF ACCOUNTS OR SEPARATE VOUCHERS IN RESPECT OF VARIOUS CONTRACT EXECUTED AT DIFFERENT PLACES AT J&K AND THAT COMPLETE PAYMENT V OUCHERS OF VARIOUS EXPENSES WERE NOT PRODUCED, THEREFORE THE GENUINENE SS OF THE VARIOUS 10 EXPENSES CLAIMED IN P&L ACCOUNT, REMAINED UNVERIFI ED. HE ALSO OBSERVED THAT NO WORK IN PROGRESS OR BILL RECEIVABLE HAD BEEN SHO WN IN THE ACCOUNT BY THE ASSESSEE AND THAT THE ASSESSEE HAD CLAIMED ONLY FOU R BANK ACCOUNT IN ITS BOOKS OF ACCOUNT BUT WHEN LATER CONFRONTED THE ASSESSEE A DMITTED ANOTHER BANK ACCOUNT WITH STATE COOPERATIVE BANK BUT NO LEDGER A CCOUNT OF THIS ACCOUNT WAS PROVIDED WHICH SHOWS THAT BANK ACCOUNTS WERE IN COMPLETE / INCORRECT. HE ALSO OBSERVED THAT THE ASSESSEE INITIALLY DENIED HA VING ANY FDR BUT LATER ADMITTED TO HAVE BANK FDR OF RS. 1,00,00,000/- WHOS E DETAILS WERE NOT PROVIDED SUGGESTING INCOMPLETENESS OF THE ACCOUNT. THE LD. C IT(A) ALSO OBSERVED THAT THE ASSESSEE HAD EITHER FAILED TO DEDUCT TDS OR DEDUCTE D IT PARTLY IN VARIOUS PAYMENTS ATTRACTING TDS PROVISIONS AS ENUMERATED IN THE ASSESSMENT ORDER. IT WAS POINTED OUT THAT NO MUSTER ROLLS OF LABOUR USED AND THE VOUCHERS WERE PRODUCED BEFORE THE A.O. THEREFORE THE CLAIM OF LAB OUR EXPENSES REMAINED UNVERIFIED. 6.2 LD. CIT(A) IN VIEW OF THE ABOVE SAID OBSERVATIO N HELD THAT THE BOOKS OF ACCOUNTS WERE NOT PROPERLY MAINTAINED, THOSE WERE I NCOMPLETE AND INCORRECT, THEREFORE THE REJECTION OF BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT WAS JUSTIFIED. 6.3. AS REGARDS TO THE APPLICATION OF NET PROFIT RA TE OF 8%, LD. CIT(A) OBSERVED THAT THE A.O. ISSUED NOTICE UNDER SECTION 133(6) O F THE ACT TO SOME CONTRACTEES OF THE ASSESSEE WHO CONFIRMED TOTAL CONTRACTS PAYME NTS OF RS. 13,65,47,363/- ONLY AND THAT THE NET PROFIT RATE OF 8% ON THE VERI FIED CONTRACT RECEIPT OF RS. 13,65,47,363/- WAS VERY FAIR AND REASONABLE WHICH W AS SUPPORTED BY VARIOUS DECISIONS OF THE ITAT, AMRITSAR & CHANDIGARH BENCHE S WHERE IN THE NET PROFIT RATE OF 8% ON THE GROSS CONTRACT RECEIPT WAS UPHELD . HE THEREFORE UPHELD THE ADDITION OF RS. 97,92,990/-. 11 6.4. AS REGARDS TO THE ADDITION OF RS. 45,40,497/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT OR RECEIPTS IS CONCERNED, THE LD. CIT(A ) OBSERVED THAT ACTION OF THE A.O. IN ESTIMATING THE NET PROFIT ON THE UNVERIFIED BOOK RECEIPT OF RS. 3,02,69,980/- BY APPLYING NET PROFIT RATE WAS JUSTI FIED IN PRINCIPLE, HOWEVER, HE WAS OF THE VIEW THAT THE A.O. HAD APPLIED TOO HIGH NET PROFIT RATE OF 15% WITHOUT ANY BASIS WHERE AS THE NET PROFIT RATE OF 8 % WAS APPLIED ON THE VERIFIED GROSS RECEIPT. HE THEREFORE REDUCED THE NET PROFIT RATE OF 15% TO 8% ON THE ABOVE SAID CONTRACT RECEIPT OF RS. 3,02,69,980/-. 6.5. AS REGARDS TO THE ADDITION OF RS. 9,00,000/- O N ACCOUNT OF INTEREST INCOME THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT T HE A.O. IN PARA 8 OF THE ASSESSMENT ORDER HAD HIMSELF AGREED THAT THE INTERE ST INCOME ACCRUED ON FDR WAS INCLUDED IN THE OTHER INCOME DISCLOSED IN THE P &L ACCOUNT AND THAT THE FDR AMOUNT WAS DISCLOSED IN THE BALANCE SHEET. IT W AS SUBMITTED THAT THE ASSESSEE ACCOUNTED FOR THE INTEREST INCOME EARNED O N THE FDR AND THE FACT WAS COMMUNICATED TO THE A.O. WHO STILL MADE THE ADD ITION. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVE D THAT NO SUCH DETAILS ABOUT THE ACCOUNTING OF FDR AMOUNTING TO RS. 1,00,00,000/ - IN THE BOOKS OF ACCOUNTS AND ACCOUNTING FOR THE INTEREST CREDITED THEREON WA S PROVIDED BY THE ASSESSEE EITHER BEFORE THE A.O. OR BEFORE HIM. HE THEREFORE SUSTAINED THE ADDITION OF RS. 9,00,000/- ALSO. 7. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN SECOND APPEAL TO THE ITAT AMRITSAR BENCH, WHEREIN BOTH THE LD. MEMBERS D EFERRED ON THEIR VIEWS. THE LD. JUDICIAL MEMBER HELD THAT THE ASSESSE HAD REPLI ED EACH AND EVERY QUERY RAISED BY THE A.O. AND ALSO SUBMITTED RELEVANT DOCU MENTS IN SUPPORT OF ITS CONTENTION WHICH CLEARLY REFLECTED THAT THE ASSESSE E HAD REPLIED EACH AND EVERY OBJECTION OF THE A.O. WITH SUBSTANTIVE EVIDEN CE THEREFORE IN CUMULATIVE EFFECT THERE WAS NO REASON FOR AFFIRMING THE REJECT ION OF BOOKS OF ACCOUNTS. 12 8. AS REGARDS TO THE ADDITION OF RS. 45,40,497/- ON ACCOUNT OF PROFIT ON TURNOVER OF RS. 3,02,69,980/- BY APPLYING THE NET P ROFIT RATE OF 8%. THE LD. JUDICIAL MEMBER DELETED THIS ADDITION SINCE THE REJECTION OF BOOKS OF ACCOUNTS WAS SET ASIDE. THE ANOTHER ADDITION OF RS. 9,00,000/- ON AC COUNT OF ACCRUED INTEREST ON FDR WAS ALSO DELETED BY OBSERVING THAT THE ASSESSEE HAD PROPERLY COMMUNICATED TO THE A.O. THAT THE FDR AS WELL AS AC CUMULATED INTEREST HAD BEEN DISCLOSED. 9. IN HIS DISSENTING ORDER, THE LD. ACCOUNTANT MEMB ER OBSERVED THAT THE CONTRACT RECEIPTS FOR THE YEAR WERE FROM ONLY THREE CONTRACTEES WHO HAD ALLOWED THE CREDIT TO THE ASSESSEE DURING THE YEAR AT AN AGGREGATE OF RS. 1365.47 LACS ON WHICH TAX WAS DEDUCTED AT SOURCE AN D MERELY BECAUSE THE DISCLOSED TURNOVER (RECEIPT) WAS HIGHER WOULD NOT A BSOLVE THE ASSESSEE FROM ITS OBLIGATION IN LAW TO EXPLAIN THE BALANCE CREDIT APP EARING IN ITS BOOKS FOR THE YEAR. AT THE SAME TIME HE OBSERVED THAT EVEN THE BI LLS TO THAT EXTENT RAISED BY THE ASSESSEE DURING THE YEAR WERE CLEARED BY THOSE PARTIES. THOUGH THOSE WERE ACCOUNTED FOR BY THE ASSESSEE AS INCOME IN THAT CAS E THE DIFFERENCE WOULD STAND TO BE EXPLAINED WITH REFERENCE TO THE ACCOUNT STATEMENT OF THESE THREE PARTIES AND THE CORRESPONDING BILLS. HE ALSO OBSERV ED THAT THE DIFFERENCE MAY ALSO REPRESENT THE CONTRACT WORK OF AN EARLIER YEAR S ACCOUNTED FOR BY THE ASSESSEE IN THE CURRENT YEAR I.E; ON CREDIT BEING A LLOWED TO IT BY CONCERNED CONTRACTEES OR OTHERWISE. HE FURTHER OBSERVED THAT THE ASSESSEE HAD NOT AT ANY STAGE OFFERRED TO RECONCILE THE DIFFERENCE OR OTHER WISE SHOW IT TO BE CONTRACT RECEIPT. THEREFORE THE RECEIPTS WHICH THE ASSESSEE ACCOUNTED FOR THE YEAR WERE NOT CORRECT AND COMPLETE. HE ALSO OBSERVED THAT THE RE WAS NO WORK IN PROGRESS, IN ANY OF THE PROJECT UNDER PROGRESS, BOTH AS AT TH E BEGINNING AND THE END OF THE YEAR WAS DIFFICULT TO UNDERSTAND AND IN THE ABS ENCE OF ANY STOCK RECORD IT WAS DIFFICULT TO VERIFY THE ASESSEES CLAIM OF NIL CLOSING STOCK OF ANY RAW MATERIAL AND WORK IN PROGRESS AT THE YEAR END. 13 10. LD. ACCOUNTANT MEMBER OBSERVED THAT THERE WAS N O REQUIREMENT IN LAW FOR MAINTAINING PROJECT WISE ACCOUNTS, THE SAME WAS BORNE OUT BY THE NEED TO PROPERLY ACCOUNTED FOR THE DIRECT EXPENDITURE, AS W ELL AS REVENUES, OF SUCH PROJECT. HE ACCORDINGLY HELD THAT IT WAS A FIT CASE FOR REJECTION OF ACCOUNT. THE LD. ACCOUNTANT MEMBER HELD THAT THE REJECTION OF BO OKS BY THE A.O. AS THE SAME WERE NOT CORRECT AND COMPLETE THUS NOT RELIABL E FOR DEDUCING CORRECT INCOME THERE FROM, WAS BASED ON A NUMBER OF DEFICIE NCIES WHICH WERE SUFFICIENT TO ENDORSE AND UPHELD THE APPLICATION OF SECTION 145(3) OF THE ACT. 11. THE LD. ACCOUNTANT MEMBER ON THE ISSUE RELATING TO THE APPLICATION OF NET PROFIT RATE, ON THE MISCELLANEOUS INCOME OF RS. 20.31 LACS STATED TO BE SCRAP SALE AND INTEREST OBSERVED THAT HOW COULD A PROFIT RATE BE APPLIED ON THOSE RECEIPTS AS DONE FIRSTLY BY THE A.O. WHO WAS NOT SU RE OF THE NATURE OF THE RECEIPTS AND THEN BY THE LD. CIT(A) WHO APPARENTLY TREATED T HE SAME AS A PART OF THE CONTRACT RECEIPT. 12. AS REGARDS TO THE ADDITION OF RS. 9,00,000/- TO WARDS INTEREST ON FDR, THE LD. ACCOUNTANT MEMBER OBSERVED THAT THE ASSESSEE HAD CL AIMED TO HAVE ACCOUNTED INTEREST OF RS. 5.10 LACS AND THE BREAKUP OF INCOME OF RS. 20,30,658/- HAVE BEEN FURNISHED IN THE ASSESSMENT PROCEEDINGS. HE DIRECTED THE A.O. TO VERIFY THE SAID FACT AND NOT TO MAKE SEPARATE ADDIT ION. 13. AS THERE WAS DIFFERENCE OF OPINION IN BETWEEN T HE LD. MEMBERS, THE HON'BLE PRESIDENT NOMINATED ME UNDER SECTION 255(4) OF THE ACT AS THIRD MEMBER TO RESOLVE THE CONTROVERSY. 14. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE AT THE TIME OF HEARING IN THE REGULAR BENCH AND FURTHER SUBMITT ED THAT THE A.O. REJECTED THE BOOKS OF ACCOUNTS FOR THE FOLLOWING REASONS: 1 MORE CONTRACT RECEIPTS ACCOUNTED FOR BY THE APPELLA NT THAN CONTRACT PAYMENTS DISCLOSED BY FORM 26AS. 2 NON-MAINTENANCE OF PROJECT WISE BOOKS OF ACCOUNTS. 14 3 NON PROVISION OF VOUCHERS. 4 GUESSING THAT THE APPELLANT MUST BE HAVING WIP. 5 NON PROVISION OF BANK STATEMENT 6 FDR ACCOUNTED FOR BUT DETAILS AS PER THE WILL OF TH E LD AO NOT PROVIDED. 7 YOU HAVE CREDITED RS. 20,30,658/- IN P&L ACCOUNT. N O SPECIFIC DETAILS IN THIS REGARD PROVIDED. 8 ALLEGED THAT THE APPELLANT EITHER FAILED TO DEDUCT TAX AT SOURCE OR DEDUCTED PARTLY. 9 PROVISION OF SUPPLEMENTARY PARTNERSHIP DEED. HE COUNTERED EACH OF THE ABOVE REASONS AND SUBMITTE D IN WRITING AS UNDER: THE ASSESSEE HAS SHOWN HIGHER RECEIPTS THAN STATED IN 26AS IT IS BECAUSE OF THE FACT THE MOST OF THE GOVERNMENT AGENCIES WERE NOT F ILLING TDS RETURN IN TIME THAT IS WHY THE SAME WAS NOT GETTING REFLECTED IN 26AS. BUT REFLECTING PROPER BUSINESS RECEIPTS THAN 26AS IS NOT AN IRREGULARITY WHICH COU LD WARRANT INVOKING OF SECTION 145(3) OF THE INCOME TAX ACT 1961.I MAY INVITE KIND ATTENTION OF HONORS TOWARDS PARA 1 OF PAGE 39 OF THE PAPER BOOK WHERE IT HAS BE EN WELL EXPLAINED TO THE LD. A.O VIDE REPLY. IF GROSS RECEIPTS ARE MORE THEN IT C AN NOT BE REASON FOR REJECTION OF BOOKS OF ACCOUNTS. HOWEVER IF THE ASSESSING OFFICER COULD NOT VERIFY THE SAME THEN HE SHOULD HAVE TO SIMPLY MAKE THE ADDITION AND TAX ACCORDINGLY. THE LD. ASSESSING OFFICER ESTIMATES THIS INCOME OTHER THAN CONTRACT INCOME AND APPLIES NET PROFIT RATE OF 15% AND NOT DOUBTING DIRECT EXPE NSES LIKE MATERIAL, SUB CONTRACT EXPENSES, SERVICE TAX AND LABOUR. SINCE TH E ASSESSING OFFICER HAS ESTIMATED INCOME OF 15% ON RECEIPTS OF RS. 3,02,69, 980/- AND SAID AMOUNT IF TAKEN OUT OF THE TRADING ACCOUNT RESULT A LOSS OF 3,02,69 ,980/- AND IT IS THEREFORE NOT UNDERSTANDABLE WHAT TREATMENT HE PROVIDED FOR THE D IRECT EXPENSES INCURRED IN THE TRADING ACCOUNT. THE LD. ASSESSING OFFICER CONS IDERED RS. 3,02,69,980/- AS A SEPARATE BUSINESS OTHER THAN CONTRACT BUSINESS AND ESTIMATED PROFIT PERCENTAGE OF 15% WHICH FINALLY LD. CIT(A) REDUCED TO 8%. IF T HIS IS A SEPARATE BUSINESS THEN WHAT ABOUT EXPENSE LIKE MATERIAL, LABOUR, SUB CONTR ACT ETC. WHICH HE HAS NOT DISPUTED. HE HAS DISPUTED THE CREDIT SIDE, GROSS RE CEIPTS, BUT WHAT ABOUT DEBIT SIDE WHICH HAS BEEN INCURRED FOR EXECUTION OF CONTR ACTS AND EARNING OF SAID RECEIPTS. THEREFORE THIS CAN NOT FORM BASIS FOR REJ ECTION OF BOOKS OF ACCOUNTS. IS THIS JUST THE INSTANCE HE WANTED TO ESTIMATE INC OME AND THAT TOO AT A VERY HIGHER SIDE BY IGNORING ASSESSES BOOKS, AUDIT REPO RT, SUBSIDIARY INFORMATION AND EXPLANATION ETC. ACTUALLY HE HAS NOT REJECTED BOOKS OF ACCOUNTS BUT SIMPLY IGNORED BOOKS FOR THE SAKE OF ESTIMATION OF INCOME AT A HIGHER SIDE. MAKING THIS AS GROUND FOR REJECTION IS ABSOLUTELY H YPOTHETICAL AND THEREFORE UNJUSTIFIED. 2 NON-MAINTENANCE OF PROJECT WISE BOOKS OF ACCOUNTS. THE ASSESEE HAS MAINTAINED PROPER BOOKS OF ACCOUNTS AS REGUIRED BY LAW WHICH WERE EXAMINED BY THE AUDITORS. IT IS NOT UNDERSTAND ABLE WHY THE LD. ASSESSING OFFICER SUGGESTS MAINTENANCE OF SEPARATE BOOKS OF A CCOUNTS FOR PROJECTS. I MAY INVITE KIND ATTENTION OF HONORS TOWARDS PARA 2 OF P AGE 39 OF THE PAPER BOOK WHERE IT HAS BEEN WELL EXPLAINED TO THE LD. A.O VIDE REPLY. GENERALLY ACCEPTED BOOKS OF ACCOUNTS ARE CASH BOOK, LEDGER, BANK BOOK/ BANK ACCOUNTS AND STOCK 15 REGISTERS. IT IS UPTO THE ASSESSEE HOW HE MAINTAINS BOOKS OF ACCOUNTS FROM WHERE BALANCE ARE TAKEN FOR PREPARATION OF FINANCIAL STAT EMENTS. THE APPELLANT HAS BEEN MAINTAINING ABOVE BOOKS OF ACCOUNTS REGULARLY AND IN THE PAST BOOK RESULTS ARE ACCEPTED 3 NON PROVISION OF VOUCHERS. THE ASSESSING OFFICER HAS HYPOTHETICALLY STATED THA T TILL DATE COMPLETE VOUCHERS HAVE NOT BEEN PRODUCED. IN RESPECT OF SUPPORTING DO CUMENTARY EVIDENCES FOR EXPENSES CLAIMED AGAINST THE GROSS RECEIPTS TO SHOW PROFITS AT A MEAGER N.P RATE, THE GENUINENESS OF EXPENSE CLAIMED IS NOT VERIFIABL E AND PROVIDES ANOTHER GROUND FOR INCOMPLETENESS OF BOOK VERSION. IT IS NOT UNDERSTANDABLE WHICH VOUCHERS HAVE NOT BE EN PRODUCED. THE ALLEGATION IS HYPOTHETICAL AND GUESS. THE LD. ASSESSING OFFICE R WAS SUPPOSED TO IDENTIFY THE EXPENSES FOR WHICH VOUCHERS HAVE NOT BEEN PRODUCED WHICH HAS NOT DONE SO. IN ABSENCE OF ANY SUCH REASON HOW THE ALLEGATION MADE BY THE LD. A.O IS JUSTIFIED. THE ALLEGATION IS BASELESS AND NOT SUSTAINABLE. FUR THER LET US ASSUME FOR ARGUMENT SAKE THE VOUCHERS ARE NOT PRODUCED THEN IT CAN WARR ANT ADDITION THEREFORE HOW NON PRODUCTION OF VOUCHERS CAN FORM BASIS FOR REJEC TION OF BOOKS OF ACCOUNTS. SECONDLY JUSTIFICATION HAS BEEN PROVIDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE REPLY ATTACHED STATED AT PARA 3 OF PAGE 39 OF THE PAPER BOOK. 4 GUESSING THAT THE APPELLANT MUST BE HAVING WIP. 'NO WIP OR BILLS RECEIVABLES HAVE BEEN SHOWN IN THE ACCOUNTS.' HOW ASSESSING OFFICER KNOWS THE APPELLANT HAS WIP OR BILLS RECEIV ABLES WHICH HAVE NOT BEEN SHOWN. IF BOOKS OF ACCOUNTS ARE PRODUCED AND THE LD . A.O IS SUPPOSED TO EXAMINE BOOKS OF ACCOUNTS, HOW HE IS JUSTIFIED IN T RAVELING BEYOND BOOKS OF ACCOUNTS BY FRAMING HIS OWN ASSUMPTIONS AND CONCLUS IONS, ALLEGING POSSIBILITY OF WIP AND BILLS RECEIVABLES THEREBY MAKING SUCH A HAR SH ASSESSMENT BY REJECTING BOOKS OF ACCOUNTS. I MAY INVITE KIND ATTENTION OF H ONORS TOWARDS PARA 4 OF PAGE 39 OF THE PAPER BOOK WHERE IT HAS BEEN WELL EXPLAIN ED THAT THE APPELLANT HAS STATED RECEIVABLE AND NO WORK IN PROGRESS HAS REMAI NED AT THE YEAR END. HE HAS NOT BEEN ABLE TO BRING ANYTHING ON RECORD IN TERMS OF POSSIBILITY OF WIP NOR IT WAS IN THE PREVIOUS YEAR. FURTHER HE HAS NOT BEEN ABLE TO POINT OUT ANY DISCREPANCY RELATED TO THE METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT. THEN IT IS NOT UNDERSTANDABLE HOW HIS GUESS CONSTITUTES GROUND FOR REJECTION OF BOOKS OF ACCOUNTS. 5 NON PROVISION OF BANK STATEMENT YOUR HONOR EVERYTHING IS WELL STATED IN THE BOOKS O F ACCOUNTS LIKE, RECEIPTS, PAYMENTS, OTHER INCOME, BANK STATEMENTS ETC. IT IS NOT UNDERSTANDABLE WHAT CLAIM IN RESPECT OF A BANK ACCOUNT HAS TO BE MADE. WHAT ARE THE DISCREPANCIES WHICH ARE POINTED OUT HOWEVER I MANY INVITE KIND AT TENTION OF HONORS TOWARDS PARA 5 OF MY ONE OF THE REPLIES ATTACHED AT PAGE NO 40 OF THE PAPER BOOKS WHERE IS CLEARLY MENTIONED THAT BANK ACCOUNT IS ATT ACHED. EVEN FOR ARGUMENT SAKE BANK STATEMENT IS NOT PROVIDED DOES THIS MEAN THAT BOOKS OF ACCOUNTS BE REJECTED FOR NOT PROVIDING BANK STATEMENT. 6 FDR ACCOUNTED FOR BUT DETAILS AS PER THE WILL OF THE LD AO NOT PROVIDED. 16 THE ATTENTION OF HONORS IS POINTED TOWARDS OUR REPL Y STATED AT PARA 10 AND PARA 6 OF PAGE NO 32 AND 40 RESPECTIVELY OF THE PAPER BOOK WHERE IT IS STATED THAT ASSESSEE HAS FDR FOR RS. 1.00 CR AND INTEREST ACCRU ED THEREON IS RS. 5,10,000/-. THE LD. ASSESSING OFFICER HAS CHECKED LEDGER AND FOUND RS. 5,10,000/- CREDITED AS INTEREST INCOME ACCRUED ON FIXED DEPOSIT WITH THE B ANK. IF THIS IS STATED THEN THE ALLEGATION LEVELED BY TH E ASSESSING OFFICER IS BASELESS AND SECONDLY HOW THIS COULD BE REASON FOR REJECTION OF BOOKS OF ACCOUNTS. THE AMOUNT OF FDR IS STATED IN THE BALANCE SHEET AND IN TEREST ACCRUED IS STATED UNDER THE HEAD OTHER INCOME. HOW THIS EXHIBITS INCOMPLETE NESS OF BOOKS OF ACCOUNT. FURTHER THE LD. ASSESSING OFFICER HAS MADE ADDITION OF RS. 9,00,000 TO THE TOTAL INCOME OF THE APPELLANT. IF THIS ADDITION IS MADE T HEN HOW THE SAME FACTOR ON WHICH AN ADDITION IS MADE CONSTITUTES A GROUND OF R EJECTION OF BOOKS OF ACCOUNTS. 7 YOU HAVE CREDITED RS. 20,30.658/- IN P&L ACCOUNT. NO SPECIFIC DETAILS IN THIS REGARD PROVIDED. I MAY INVITE KIND ATTENTION OF HONORS TOWARD PARA N O 7 OF MY REPLY ATTACHED AT PAGE NO 40 OF THE PAPER BOOK WHERE IT IS STATED THA T INCOME TO THE TUNE OF RS. 20,30,658/- EARNED ON ACCOUNT OF SALE OF SCRAP I.E LEFT OUT MATERIAL AND INTEREST INCOME. IT IS NOT THEREFORE UNDERSTANDABLE HOW THIS CONSTITUTES GROUND FOR REJECTION OF BOOKS AND AMOUNTS TO ESTIMATION OF INC OME. 8 ALLEGED THAT THE APPELLANT EITHER FAILED TO DEDUCT TAX AT SOURCE OR DEDUCTED PARTLY. YOUR HONORS I MAY INVITE KIND ATTENTION OF HONORS T OWARDS PAGE NO 7 TO 23 OF THE PAPER BOOK WHERE ALL RECEIPTS OF TDS RETURNS ARE AT TACHED. EVEN IF ANY TDS DISCREPANCY WAS OBSERVED BASED ON FACTS THEN IT COU LD WARRANT ADDITION. HOW IS THIS POINT REASON FOR REJECTION OF BOOKS OF ACCOUNT S. ALL TDS DETAILS EXPENSES ALONG WITH TDS DEDUCTION AND RETURNS HAVE BEEN MENTIONED. I MAY INVITE KIND ATTENTION OF HONORS TOWARDS PAGE NO 35 OF THE PAPER BOOK WHIC H CLEARLY INDICATES TDS DEDUCTION DETAILS. THE ASSUMPTION IS BAD IN LAW AND THEREFORE CAN NTO HOLD GOOD FOR JUSTIFICATION OF IMPLICATION OF PROVISIONS OF S ECTION 145(3) OF THE INCOME TAX ACT 1961. 9 PROVISION OF SUPPLEMENTARY PARTNERSHIP DEED COPIES OF BOTH PARTNERSHIPS DEEDS ARE ATTACHED AT P AGE NO 24 AND 28. SUPPLEMENTARY PARTNERSHIPS DEED IS EXECUTED FOR ADM ISSION AND RETIREMENT OF OTHER PARTNERS AND IT IS NOT UNDERSTANDABLE HOW THI S CONSTITUTES DISCREPANCY WHICH WARRANTS REJECTION OF BOOKS OF ACCOUNTS. 15. ON THE BASIS OF ABOVE SUBMISSIONS, IT WAS STATE D THAT THE A.O. WILLFULLY IGNORED THE BOOKS OF ACCOUNTS FOR ESTIMATION OF INC OME AT AN HIGHER SIDE PARTICULARLY WHEN ALL THE INFORMATIONS AS WERE DESI RED BY THE A.O. HAD BEEN PROVIDED AND GIVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT WAS 17 EMPHASIZED THAT THE GROSS PROFIT RATE FOR THE YEAR UNDER CONSIDERATION WAS AT 20.91% IN COMPARISON TO THE GROSS PROFIT RATE IN PR EVIOUS YEAR AT 8.62%. THEREFORE THE REJECTION OF BOOKS OF ACCOUNTS WAS NOT JUSTIFIE D WHEN THERE WAS TREMENDOUS INCREASE IN THE GROSS PROFIT RATE. 16. LD. COUNSEL FOR THE ASSESSEE FURNISHED THE CHAR T OF NET PROFIT RATE FOR THE LAST FIVE YEARS AS PER FOLLOWING DETAILS: NP RATIO ASSESSED A.Y. (AFTER INTEREST ON CAPITAL U/S AND SALARY TO PARTNERS. 2014-15 0.94% 143(1) 2013-14 0.75% 143(3) 2012-13 0.50% 143(3) 2011-12 0.40% 143(1) 2010-11 0.11% 143(1) 17. IT WAS SUBMITTED THAT THE ASSESSEE HAD SHOWN BE TTER NET PROFIT RATE (AFTER INTEREST AND SALARY TO THE PARTNERS) IN COMPARISON TO THE PRECEDING YEAR, THEREFORE THE PROVISIONS OF SECTION 145(3) OF THE A CT APPLIED BY THE A.O, WITHOUT ANY BASIS AND WAS BAD IN LAW. IT WAS STATED THAT TH E ASSESSEE HAD EARNED TOTAL CONTRACT RECEIPT OF RS. 16,24,64,285/- AND ALL THE LEDGER ACCOUNTS HAD BEEN PROVIDED DURING THE ASSESSMENT PROCEEDINGS TO THE A .O. WHO ARBITRARILY APPLIED 8% NET PROFIT RATE ON RS. 13,65,47,363/- AND MADE T HE ADDITION OF RS. 97,92,990/- WITHOUT ANY BASIS. AS REGARDS TO THE ADDITION OF RS. 45,40,497/-. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE A.O. WHILE MAKING THIS ADDITION OBSERVED THAT APPARENTLY EITHER UNEXPLAINED CASH CREDIT OR RECEIPT FROM UNKN OWN AND UNDISCLOSED SOURCE OF INCOME, WHICH CLEARLY SHOWS THAT THE A.O. WAS N OT SURE ENOUGH THAT THE AMOUNT STATED IN THE P&L ACCOUNT WAS EITHER UNEXPLA INED CASH CREDIT OR RECEIVED FROM UNDISCLOSED SOURCE OF INCOME. IT WAS FURTHER STATED THAT THE A.O. 18 HAD HYPOTHETICALLY TAKEN RS. 2,82,39,322/- OUT OF G ROSS RECEIPT AS RECEIVED FROM UNDISCLOSED SOURCES AND IF IT WAS RECEIVED FROM UND ISCLOSED SOURCES THEN HE SHOULD NOT HAVE APPLIED A PROFIT RATE OF 15% ONLY, WHICH CLEARLY SHOWS THAT HE HAS CONSIDERED IT AS BUSINESS RECEIPT AND APPLIED A HIGHER PROFIT RATE. IT WAS ALSO STATED THAT THE A.O. HIMSELF WAS OF THE OPINION THA T THE SAID RECEIPTS WERE BUSINESS RECEIPTS THEN WHAT WAS THE NEED TO TAKE TH E SAID AMOUNT OUT OF GROSS RECEIPT AND MAKE IT A REASON FOR REJECTION OF BOOKS OF ACCOUNT. IT WAS FURTHER SUBMITTED THAT THE SALE OF SCRAP WAS ALSO TAKEN OUT OF P&L ACCOUNT AND NET PROFIT RATE OF 15% WAS APPLIED ON THE RECEIPT OF RS . 20,30,658/-. THE SAID AMOUNT WAS SHOWN BY THE ASSESSEE AS AN INCOME AND WAS DIS CLOSED IN THE BOOKS OF ACCOUNT WHICH WAS TREATED BY THE A.O. AS UNDISCLOSE D AND GROSS PROFIT RATE OF 15% WAS APPLIED ON THE TOTAL RECEIPTS OF RS. 3,02,6 9,980/- (RS. 2,82,39,322/- + RS. 20,30,658/-) THEREFORE THE ADDITION OF RS. 45,40,49 7/- WAS ARBITRARILY MADE AND NEEDS TO BE DELETED. 18. AS REGARDS TO THE ADDITION OF RS. 9,00,000/- ON ACCOUNT OF INTEREST INCOME ACCRUED ON THE FDR, IT WAS STATED THAT THE FDR WAS DISCLOSED IN THE BALANCE SHEET, THE INTEREST INCOME WAS EARNED ON IT AND ACC OUNTED FOR WHICH WAS COMMUNICATED TO THE A.O. IT WAS STATED THAT THE INT EREST AMOUNTING TO RS. 5,10,000/- WAS SHOWN IN THE MISCELLANEOUS INCOME, T HEREFORE THE ADDITION MADE BY THE A.O. WAS NOT JUSTIFIED. RELIANCE WAS PLACED ON THE DECISION OF THE ITAT, RAJKOT BENCH IN THE CASE OF ITO VS. VIRGIN LOGISTIC S REPORTED IN [2018] 53 CCH 0199 (RAJKOT TRIB), COPY OF THE SAME WAS FURNISHED WHICH IS PLACED ON THE RECORD. 19. LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THA T THE CASE LAWS RELIED UPON BY THE LD. ACCOUNTANT MEMBER IN HIS DISSENTING ORDE R WERE DISTINGUISHABLE ON FACTS. IT WAS FURTHER SUBMITTED THAT ALL THE OBJECT IONS RAISED BY THE A.O. WERE REBUTTED BY GIVING PLAUSIBLE EXPLANATION WITH EVIDE NCES ON RECORD. IT WAS STATED THAT THE A.O. ADMITTED THAT BOOKS OF ACCOUNTS WERE PRODUCED AND THOSE WERE 19 TEST CHECKED AND THAT NO EXCESS RECEIPT OR CLAIM OF TDS WAS POINTED OUT. IT WAS FURTHER STATED THAT ALL THE BUSINESS RECEIPTS WERE CONSIDERED AGAINST WHICH EXPENSES WERE BOOKED WHICH HAD BEEN ACCEPTED BY THE A.O. IT WAS ALSO STATED THAT ACCOUNTS FOR ALL THE PROJECTS WERE CONS OLIDATED WHICH WERE NOT DOUBTED BY THE A.O. AND THE METHOD OF ACCOUNTING RE GULARLY FOLLOWED BY THE ASSESSEE WAS ACCEPTED, NO SUPPRESSION OF STOCK AND INFLATION OF PURCHASES WAS POINTED OUT AND THE A.O. DID NOT MENTION ANY SPECIF IC INSTANCE OF THE EXPENSES WHICH WERE NOT INCURRED FOR THE BUSINESS PURPOSES. IT WAS EXPLAINED THAT THERE WAS NO WORK IN PROGRESS SO IT WAS NOT SHOWN. IT WAS STATED THAT ALL THE DETAILS OF THE TDS WERE FURNISHED BEFORE THE A.O. WHO HAD NOT POINTED OUT ANY AMOUNT ON WHICH TDS WAS NOT DEDUCTED, A REFERENCE WAS MADE TO PAGE NO. 35 OF THE ASSESSEES PAPER BOOK. IT WAS SUBMITTED THAT IN THE PRECEEDING AS WELL AS SUCCEEDING YEARS NO SUCH ADDITION WAS MADE AS WERE MADE IN THE YEAR UNDER CONSIDERATION AND THAT THE A.O. ESTIMATED THE HIGHE R NET PROFIT RATE WITHOUT POINTING OUT ANY BASIS, THEREFORE THE REJECTION OF BOOKS OF ACCOUNTS AND THE IMPUGNED ADDITION MADE BY THE A.O. WERE NOT JUSTIFI ED AND THE LD. CIT(A) WRONGLY UPHELD THE ACTION OF A.O. IT WAS REITERATED THAT ALL THE CONTRACTS WERE COMPLETED, SO THERE WAS NO PRESUMPTION THAT SOME WO RK IN PROGRESS OR STOCK OF THE RAW MATERIAL WAS IN POSSESSION OF THE ASSESSEE. AS SUCH THE PRESUMPTION OF THE A.O. FOR REJECTING THE BOOKS OF ACCOUNT WAS WRO NG. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS : 1. S.N. NAMASIYAM CHETTAIR VS. CIT 1960 AIR 729 (SC) 2. CHAINRUP SAMPATRUM VS. CIT 1953 AIR 519(SC) 3. CHHABILDAS TRIBHUVANDAS SHAH VS. CIT 59 ITR 733 (SC ) 20. IN HIS RIVAL SUBMISSIONS THE LD. DR STRONGLY SU PPORTED THE DISSENTING ORDER PASSED BY THE LD. ACCOUNTANT MEMBER AND SPECIFICALL Y RELIED ON PARA 4 OF THE SAID ORDER. IT WAS SUBMITTED THAT THE ASSESSEE FURN ISHED NEITHER THE DETAILS OF WORK IN PROGRESS AND THE STOCK NOR THE PROJECT WISE DETAILS AND NO EVIDENCE WAS 20 FURNISHED FOR RECONCILIATION TO EXPLAIN THE DIFFERE NCE BETWEEN THE RECEIPT SHOWN IN BOOKS OF ACCOUNT AND AS REFLECTED IN FORM NO. 26 AS. IT WAS FURTHER SUBMITTED THAT THE NET PROFIT RATE SHOWN BY THE ASSESSEE WAS ON LOWER SIDE THEREFORE BY CONSIDERING THE VARIOUS DISCREPANCIES NOTED BY THE A.O. THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE WERE NOT RELIABLE AS SUC H THE SAME WERE RIGHTLY REJECTED BY INVOKING THE PROVISION OF SECTION 145(3 ) OF THE ACT AND THE A.O. WAS JUSTIFIED IN ESTIMATING THE INCOME OF THE ASSESSEE BY APPLYING THE GROSS PROFIT RATE ON THE BASIS OF COMPARABLE CASES AND THE LD. C IT(A) WAS FULLY JUSTIFIED IN APPROVING THE VIEW OF THE A.O. AND THE ADDITIONS MA DE BY HIM. 21. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE ORDERS OF BOTH THE LD. MEMBERS ALONGWITH THE MATERI AL AVAILABLE ON THE RECORD. IN THE PRESENT CASE THE A.O. INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND REJECTED THE BOOKS OF ACCOUNTS MAINTAINED BY TH E ASSESSEE, THE MAIN REASON GIVEN FOR REJECTING THE BOOKS OF ACCOUNTS WA S THAT THE CONTRACT RECEIPT SHOWN BY THE ASSESSEE WERE NOT FULLY REFLECTED IN F ORM NO. 26AS. THE AO CONSIDERED THE AMOUNT MENTIONED IN FORM NO. 26AS AT RS. 13,65,47,363/- AS CORRECT AND IGNORED THE HIGHER FIGURE SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AT RS. 16,24,64,285/- THE DIFFERENCE OF RS. 2,82,39,322/- WAS CONSIDERED BY THE A.O. AS CASH CREDIT OR RECEIVED FROM SOME UN KNOWN & UNDISCLOSED SOURCES OF INCOME. THE AFORESAID VIEW OF THE A.O. C LEARLY SHOWS THAT HE WAS NOT SURE AS TO WHETHER THE SAID DIFFERENCE WAS CASH CRE DIT OR TRADE RECEIPT OF THE ASSESSEE. AT THE SAME TIME HE CONSIDERED THIS AMOUN T OF RS. 2,82,39,322/- ALONGWITH ANOTHER AMOUNT OF RS. 20,30,658/- WHICH W AS SHOWN BY THE ASSESSEES INCOME FROM OTHER, AS BUSINESS RECEIPT FROM UNDISCL OSED AND UNKNOWN SOURCES. HE APPLIED 15% PROFIT RATE ON SUCH RECEIPT. FROM T HE ABOVE FACTS IT IS CRYSTAL CLEAR THAT THE A.O. ON THE ONE HAND CONSIDERED THE LOWER AMOUNT REFLECTED IN FORM NO. 26AS AS BUSINESS RECEIPT AND ON THE OTHER HAND THE DIFFERENCE OF THE AMOUNT SHOWN BY THE ASSESSEE AND TAKEN BY THE A.O W AS ALSO CONSIDERED AS 21 BUSINESS RECEIPT BUT FROM UNKNOWN SOURCES, IN OTHER WORDS THERE WAS NO DOUBT ABOUT THE TOTAL RECEIPTS OF THE ASSESSEE WHICH WERE AT RS. 16,47,86,685/- (RS. 13,65,47,363/- + RS. 2,82,39,322/-). THE EXPLANATIO N OF THE ASSESSEE WAS THAT MOST OF THE GOVERNMENT AGENCIES WERE NOT FILING TDS RETU RN IN TIME THAT IS WHY THE AMOUNT SHOWN BY THE ASSESSEE AT HIGHER RECEIPT WAS NOT GETTING REFLECTED IN FORM NO. 26AS. IN THE PRESENT CASE, THE ASSESSEE FU RNISHED THE COPIES OF THE RECEIPTS BEFORE THE AUTHORITIES BELOW, NOTHING WAS BROUGHT ON RECORD THAT THOSE RECEIPTS SHOWN BY THE ASSESSEE WERE NOT CORRECT. IN THE INSTANT CASE THE GROSS PROFIT RATE SHOWN BY THE ASSESSEE FOR THE YEAR UNDE R CONSIDERATION AT 20.91% WAS MUCH HIGHER THAN THE GROSS PROFIT RATE OF THE P RECEDING YEAR AT 8.62%, THEREFORE THE REJECTION OF BOOKS OF ACCOUNTS ON THA T BASIS BY THE A.O. WAS NOT JUSTIFIED. 22. THE ANOTHER REASON GIVEN BY THE A.O. WAS THAT T HE ASSESSEE HAD NOT MAINTAINED PROJECT WISE BOOKS OF ACCOUNT. IN MY OPI NION, THAT CANNOT BE A GROUND TO REJECT THE BOOKS OF ACCOUNTS PARTICULARLY WHEN ALL THE DETAILS RELATING TO THE RECEIPT FROM THE PROJECT WERE MENTIONED BY T HE ASSESSEE IN ITS BOOKS OF ACCOUNTS THEREFORE THIS BASIS FOR REJECTING THE BOO KS WAS ALSO NOT CORRECT. 23. THE A.O. IN THIS CASE ALTHOUGH STATED THAT COMP LETE VOUCHERS HAD NOT BEEN PRODUCED, HOWEVER HE HAS NOT MENTIONED ANY PAR TICULAR VOUCHER PERTAINING TO THE EXPENSES WHICH WAS ASKED AND NOT PRODUCED. THE A.O. WHILE REJECTING THE BOOKS OF ACCOUNTS ALSO MENTIONED THAT NO WORK IN PROGRESS OR BILLS RECEIVABLE HAD BEEN SHOWN IN THE BOOKS OF ACCOUNT, THE ASSESSEE EXPLAINED THAT HE WAS NOT HAVING ANY WORK IN PROGRESS OR RECE IVABLE. THE A.O. HAD NOT BROUGHT ANYTHING ON RECORD TO SUBSTANTIATE THAT HOW MUCH WORK IN PROGRESS PERTAINING TO ANY OF THE PROJECT AND HOW MUCH BILLS RECEIVABLE, WERE THERE. THEREFORE THIS OBSERVATION OF THE A.O. WAS ONLY ON PRESUMPTION BASIS THAT THE ASSESSEE MIGHT HAVE HAD SOME WORK IN PROGRESS OR BI LL RECEIVABLE, SO, THE REJECTION OF THE BOOKS OF ACCOUNTS ON THIS BASIS WA S NOT JUSTIFIED. 22 23.1 THE A.O. ALSO STATED IN THE REASONS FOR REJECT ING THE BOOKS OF ACCOUNT THAT ASSESSEE WAS HAVING A FDR OF RS. 1 CRORE BUT INTERE ST THEREON WAS NOT SHOWN, HOWEVER THE EXPLANATION OF THE ASSESSEE WAS THAT TH E INTEREST AMOUNTING TO RS. 5,10,000/- ON THE SAID FDR WAS ACCOUNTED FOR IN THE MISCELLANEOUS INCOME OF RS. 20,30,658/- WHICH ALSO INCLUDED THE SALE OF SCRAP. THE A.O. ALTHOUGH COULD NOT REBUT THE SAID EXPLANATION OF THE ASSESSEE BUT CONS IDER THE AMOUNT OF RS. 20,30,658/- AS RECEIPT OF THE ASSESSEE FROM UNDISCL OSED SOURCES AND APPLIED GP RATE OF 15% ON THE SAID AMOUNT. THE SAID ACTION OF THE A.O. IS NOT UNDERSTANDABLE WHEN THE ASSESSEE HIMSELF HAD SHOWN ENTIRE INCOME, HE APPLIED GP RATE OF 15% ONLY ON THE SAID INCOME WHIC H HAD ALREADY BEEN DISCLOSED BY THE ASSESSEE, THEREFORE, IT COULD NOT HAVE BEEN A GROUND TO REJECT THE BOOKS OF ACCOUNTS. 23.2. ANOTHER ALLEGATION OF THE A.O. WAS THAT THE A SSESSEE EITHER FAILED TO DEDUCT TAX AT SOURCE OR DEDUCTED PARTLY. IN THIS RE GARD, THE ASSESSEE FURNISHED THE DETAILS OF RECEIPT AND TDS WHICH ARE PLACED AT PAGE NO. 35 OF THE ASSESSEES PAPER BOOK, IT WAS CLAIMED TO HAVE BEEN FURNISHED B EFORE THE A.O. THE ASSESSEE ALSO ATTACHED THE DETAILS OF TDS DEDUCTED, COPIES OF NECESSARY CHALLANS AND ACKNOWLEDGEMENT OF TDS AT PAGE NO. 7 T O 23 OF THE PAPER BOOK WHICH WERE CLAIMED TO HAVE BEEN FURNISHED BEFORE TH E AUTHORITIES BELOW. NO SPECIFIC DISCREPANCY WAS POINTED OUT IN THOSE DETAI LS THEREFORE THIS ALLEGATION OF THE A.O. ALSO COULD NOT HAVE BEEN A GROUND TO REJEC T THE BOOKS OF ACCOUNTS. 23.3 IN THE PRESENT CASE, THE A.O. ALSO ALLEGED THA T THE NET PROFIT RATE DECLARED BY THE ASSESSEE AT 0.69% WAS NEGLIGIBLE. T O REBUT THE SAID ALLEGATION THE ASSESSEE FURNISHED THE DETAILS OF THE NET PROFI T RATE AS UNDER: ASSESSMENT YEAR NP RATIO (AFTER INTEREST ON CAPITAL AND SALARY TO PARTNERS.) ASSESSED U/S 2014-15 0.94% 143(1) 2013-14 0.75% 143(3) 23 2012-13 0.50% 143(3) 2011-12 0.40% 143(1) 2010-11 0.11% 143(1) 24. FROM THE AFORESAID DETAILS, IT IS CLEAR THAT TH E NET PROFIT RATE WAS PROGRESSIVE AND IT WAS NOT CONSISTENT FOR ALL THE Y EARS AND WHEN THE A.O. ACCEPTED THE NPR OF 0.50% FOR THE PRECEDING ASSESSM ENT YEAR 2012-13 WHILE FRAMING THE SCRUTINY ASSESSMENT UNDER SECTION 143(3 ) OF THE ACT, THIS ALLEGATION THAT THE ASSESSEE HAD SHOWN NEGLIGIBLE NET PROFIT R ATE AFTER INTEREST ON CAPITAL AND SALARY TO THE PARTNERS WAS ALSO NOT SUFFICIENT TO REJECT THE BOOKS OF ACCOUNTS OF THE ASSESSEE PARTICULARLY WHEN THE NET PROFIT RA TE SHOWN AFTER CLAIMING THE INTEREST ON CAPITAL AND SALARY TO THE PARTNERS FOR THE YEAR UNDER CONSIDERATION WAS BETTER THAN THE PRECEDING YEARS. IN THE PRESENT CASE THE A.O. ALLEGED THAT THE ASSESSEE HAD CLAIMED LABOUR WAGES TO THE TUNE O F RS. 57,96,521/- AGAINST THE GROSS RECEIPT BUT NO MUSTER ROLL WAS FURNISHED AND THAT IT HAD NOT APPEARED POSSIBLE THAT SUCH LARGE MAN POWER / LABOUR HAD BEE N ARRANGED WITHOUT A SERVICE OF MATE AND THAT THE PAYMENTS MADE WERE COV ERED UNDER SECTION 194C OF THE ACT. HOWEVER, NO SPECIFIC INSTANCE WAS BROUGHT ON RECORD TO SUBSTANTIATE THAT THE ASSESSEE WAS REQUIRED TO DEDU CT THE TDS ON A PARTICULAR PAYMENT OF THE LABOUR, THEREFORE THE REASONS GIVEN BY THE A.O. FOR REJECTING THE BOOKS OF ACCOUNTS WERE NOT SUFFICIENT PARTICULARLY WHEN THE ASSESSEE HAD DECLARED PROGRESSIVE GROSS PROFIT RATE AS WELL AS N ET PROFIT RATE IN COMPARISON TO THE EARLIER YEARS AND THE A.O. HIMSELF CONSIDERED T HE DIFFERENCE OF GROSS RECEIPTS TAKEN BY HIM AND DISCLOSED BY THE ASSESSEE, AS THE RECEIPTS AND APPLIED GROSS PROFIT RATE OF 15% ON THE SAID RECEIPTS EVEN WHEN T HE ASSESSEE HAD ALREADY DISCLOSED THOSE RECEIPT IN ITS BOOKS OF ACCOUNTS. 25. THEREFORE BY CONSIDERING THE TOTALITY OF THE FA CTS AS DISCUSSED HEREINABOVE, I AM OF THE VIEW THAT THE LD. JUDICIAL MEMBER HAS TAKEN A POSSIBLE VIEW IN HOLDING THAT THE A.O. WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT, AND SINCE THE REJECTION OF BOOKS OF ACCOUNTS BY THE A.O. HAS BEEN HELD TO BE 24 UNJUSTIFIED THE TRADING ADDITION AMOUNTING TO RS. 9 7,92,990/- MADE BY APPLYING THE NET PROFIT RATE OF 8% WAS NOT JUSTIFIED WHEN TH E NET PROFIT RATE DECLARED BY THE ASSESSEE WAS BETTER THAN THE NET PROFIT RATE OF EARLIER YEARS WHICH HAD BEEN ACCEPTED BY THE DEPARTMENT. 26. SIMILARLY THE ADDITION OF RS. 45,40,497/- BY A PPLYING THE NET PROFIT RATE OF 15% ON THE RECEIPT AND OTHER INCOME AMOUNTING TO RS . 2,82,39,322/- AND RS. 20,30,658/- RESPECTIVELY WAS ALSO NOT JUSTIFIED WHE N THE ASSESSEE HAD ALREADY SHOWN THOSE RECEIPTS IN ITS BOOKS OF ACCOUNT AND OF FERED FOR TAXATION. SIMILARLY THE ESTIMATED ADDITION OF RS. 9,00,000/- ON ACCOUNT OF INTEREST ON THE FDR OF RS. 1,00,00,000/- WAS NOT JUSTIFIED WHEN THE ASSESSEE I TSELF HAD ALREADY DISCLOSED THE ACCRUED INTEREST OF RS. 5,10,000/- AND INCLUDED THE SAME IN THE OTHER INCOME OF RS. 20,30,658/-. THEREFORE THIS ADDITION ON PRESUMP TION BASIS ALSO DESERVES TO BE DELETED. 27. IN VIEW OF THE AFORESAID DISCUSSION I CONCUR WI TH THE VIEW OF THE LD. JUDICIAL MEMBER. NOW THIS APPEAL WOULD BE PLACED BE FORE THE REGULAR BENCH FOR GIVING EFFECT TO THE OPINION OF THE MAJORITY. SD/- . .. . . .. . , ,, , ( N.K. SAIN I) / // / VICE PRESIDENT AG DATE: 09/01/2020 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. #/ CIT 4. # ()/ THE CIT(A) 5. , , ,/ DR, ITAT, AMRITSAR 6. , / GUARD FILE