The Income Tax Officer, Kashmir V. Sh. Abdul Jabbar Bhat, Kashmir

ITA 275/ASR/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73202 (ITAT-AMRITSAR)
• Duration Of Justice: 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 29-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Corroborative evidences; Onus to prove
• Section: 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.303(ASR)/2013 ASSESSMENT YEAR:2009-10 PAN :AJTPB4894B SH.ABDUL JABBAR BHAT, VS INCOME TAX OFFICER, S/O MOHD. SULTAN BHAT, ANANTNAGAR, PROP. M/S. ABDUL JABBAR BHAT & SONS, KASHMIR ( J & K). MANDOOR, TRAL, PULWAMA, KASHMIR. (APPELLANT) (RESPONDENT) I.T.A. NO.275(ASR)/2013 ASSESSMENT YEAR:2009-10 PAN :AJTPB4894B INCOME TAX OFFICER, VS. SH.ABDUL JABBAR BHAT, ANANTNAGAR, S/O MOHD. SULTAN BHAT, KASHMIR ( J & K). PROP. M/S. ABDUL JABBAR BHAT & SONS, MANDOOR, TRAL, PULWAMA, KASHMIR. (APPELLANT) (RESPONDENT) ASSESSEE BY:SH.UPENDER BHAT, CA DEPARTMENT BY:SH. MAHAVIR SINGH, DR DATE OF HEARING: 09/01/2014 DATE OF PRONOUNCEMENT:17/01/2014 ORDER PER BENCH ; ITA NO.303(ASR)/2013 ITA NO.275(ASR)/2013 2 THIS CROSS APPEALS OF THE ASSESSEE AND THE REVENUE ARISES FROM ORDER OF THE CIT(A), JAMMU, DATED 12.02.2013 FOR THE ASSE SSMENT YEAR 2009-10. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN ESTIMATING NET PROFIT OF 7% ON GROSS C ONTRACTUAL RECEIPTS. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ESTIMATING NET PROFIT OF 20% ON ESTIMA TED TURNOVER OF REAL ESTATE BUSINESS. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT ALLOWING DEPRECIATION ON THE ASSET S PUT TO USE. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A MEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) WAS RIGHT IN DIRECTING THE A.O. TO ADOPT NET PROFIT RATE OF 7% OF THE TOTAL CONTRACT RECEIPTS INSTEAD OF 10% APPLIED BY THE AO WHEN THE COMPLETENESS AND CORRECTNESS OF THE VERSIO N OF THE ACCOUNTS/BOOK RESULTS/BOOKS OF ACCOUNT COULD NOT BE ESTABLISHED AND BOOKS OF ACCOUNT REJECTED U/S 145(3) OF THE INC OME TAX ACT, 1961. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT IN DIRECTING THE A.O. TO ADOPT NET PROFIT RATE OF 7% OF THE TOTAL RECEIPTS INSTEAD OF 10% APPLIED BY THE A O IN VIEW OF THE DECISION OF HONBLE ITAT CHANDIGARH A BENCH I N THE CASE OF M/S. SHIVAM CONSTRUCTION CO. AND AFFIRMED B Y THE HONBLE P & H HIGH COURT IN THEIR ORDER IN ITA NO.1 83 OF 2007 DATED 14.05.2007. ITA NO.303(ASR)/2013 ITA NO.275(ASR)/2013 3 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT IN DIRECTING THE A.O. TO ADOPT NET PROFIT RATE OF 7% OF THE TOTAL RECEIPTS INSTEAD OF 10% APPLIED BY THE A O WHEN THE JURISDICTIONAL BENCH OF ITAT, AMRITSAR IN ITA NO.750(ASR)/1992 HAD HELD THAT THE APPLICATION OF N .P. RATE OF 10% ON GROSS RECEIPTS IS PROPER. THE SAID ORDER OF THE JURISDICTIONAL ITAT HAS BEEN CONFIRMED BY THE HONB LE P & H HIGH COURT IN THEIR ORDER IN ITA NO. 166 OF 1999 DA TED 10.09.2010. 4. THE APPELLANT CRAVES TO AMEND OR ADD ANY ONE OR MORE GROUNDS OF APPEAL. 3. THE BRIEF FACTS OF THE CASE AS APPEARING IN THE ORDER OF AO ARE REPRODUCED AS UNDER: THE ASSESSEE IS A CONTRACTOR AND HA DECLARED GROSS CONTRACT RECEIPTS OF RS.3,95,27,072/- FOR THE PREVIOUS YEAR 2008-09 R ELEVANT TO A.Y. 2009-10. AGAINST THE SAID CONTRACT RECEIPTS, THE AS SESSEE HAS DEBITED VARIOUS EXPENSES AND HAS DECLARED A NET PROFIT OF R S.4,90,690/- ONLY IN HIS RETURN OF INCOME FILED FOR THE A.Y. 2009-10. AS NARRATED IN THE FOREGOING PARAS AND DULY CONFRONTED TO THE ASSESSEE VIDE THE FINAL OPPORTUNITY NOTICE/DRAFT ASSESSMENT ORDER DATED 5.1 2.2011, THE ASSESSEE EVEN AFTER BEING PROVIDED WITH SUFFICIENT TIME/OPPORTUNITY TO ESTABLISH AND VERY/PROVE THE GENUINENESS, COMPLETEN ESS AND CORRECTNESS OF HIS VERSION OF ACCOUNTS/BOOK RESULTS BY PRODUCING THE SUPPORTING EVIDENCE/VOUCHERS, ETC. HAS FAILED TO D O SO. THE BOOK RESULTS TRADING VERSION OF ACCOUNTS SHOWN BY THE AS SESSEE FOR THE PERIOD ENDING ON 31.3.2009 ON WHICH THE ASSESSEE HA S RELIED UPON WHILE MAKING HIS RETURN OF INCOME REMAIN UNVERIFIAB LE AND AS SUCH CANNOT BE ACCEPTED. IT WOULD NOT BE APPROPRIATE TO PLACE ANY RELIANCE ON SUCH TRADING VERSION FOR THE REASON THAT THE COR RECTNESS, COMPLETENESS AND GENUINENESS OF THE TRADING VERSION HAS NOT BEEN CORROBORATED/SUBSTANTIATED BY PRODUCING NECESSARY S UPPORTING DOCUMENTARY EVIDENCE BY THE ASSESSEE AND HE HAS FAI LED TO DISCHARGE HIS ONUS TO PROVE THE GENUINENESS OF THE SAME. FURT HER, THE ASSESSEE ITA NO.303(ASR)/2013 ITA NO.275(ASR)/2013 4 DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS CAN DIDLY ADMITTED TO HAVE FAILED TO MAINTAIN PROPER/COMPLETE VOUCHERS/DO CUMENTARY EVIDENCE IN SUPPORT OF THE EXPENDITURE CLAIMED CITI NG HARD WORKING CONDITIONS AND IT HAS BEEN CLARIFIED TO HIM THAT IN ABSENCE OF ANY SUCH SUPPORTING DOCUMENTARY EVIDENCE/BOOKS OF ACCOUNT, I T WOULD BE APPROPRIATE TO ASSESS HIS TAXABLE INCOME FROM THE C ONTRACT BUSINESS BY ESTIMATING HIS PROFIT AT A NP RATE OF 10% OF THE GROSS CONTRACT RECEIPTS. IN VIEW OF THESE FACTS, THE TRADING RESUL TS DECLARED AND RELIED UPON BY THE ASSESSEE ARE LIABLE TO BE REJECTED. ACC ORDINGLY, THE TRADING RESULTS DECLARED FOR THE PERIOD ENDING 31. 3.2009 AND RELIED UPON IN THE RETURN OF INCOME FILED FOR THE A.Y. 200 9-10 ARE HEREBY REJECTED AFTER TAKING RECOURSE TO THE PROVISIONS OF SECTION 145(3) OF THE I.T.ACT, 1961, THEREFORE, THE INCOME OF THE ASS ESSEE IS ASSESSED ON ESTIMATION IN THE MANNER AS PROVIDED UNDER THE PROV ISIONS OF SECTION 144 OF THE ACT ON THE BASIS OF AVAILABLE RECORDS AF TER GIVING DUE CONSIDERATION TO THE INFORMATION FILED BY THE ASSES SEE/COLLECTED INDEPENDENTLY AS WELL AS THE RELIES FILED BY THE AS SESSEE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CAS E IN TOTALITY, IT IS HELD FAIR AND REASONABLE TO ESTIMATE THE PROF ITS OF THE ASSESSEE FROM CONTRACT BUSINESS BY APPLYING A NET PROFIT RAT E OF 10% OF THE GROSS RECEIPTS. SUCH A RATE OF PROFITS HAS BEEN HEL D FAIR AND REASONABLE BY HONBLE ITAT, CHANDIGARH BENCH, CHAND IGARH AND ALSO CONFIRMED BY THE HONBLE P & H HIGH COURT) IN THE CASE OF SHIVAM CONSTRUCTION CO. VS. ACIT IN ITA NOS. 383 & 384/2004, 622/2005, 385 & 386/2004 AND 728/2005. ACCORDINGLY, RELYING UPON THE SAID JUDGMENTS, THE I NCOME OF THE ASSESSEE FIRM CONTRACT BUSINESS IS WORKED OUT AT RS .39,52,707/- BY APPLYING A N.P. RATE OF 10% OF THE GROSS CONTRACT R ECEIPTS OF RS.3,95,27,072/- FOR THE ABOVE SAID ASSESSMENT YEAR . AS THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME/FURNISHED I N ACCURATE PARTICULARS OF THIS INCOME TO THE TUNE OF RS.34,62, 017/- {ESTIMATED PROFIT MINUS RETURNED INCOME}, NECESSARY PENALTY P ROCEEDINGS U/S 271(1)(C) /274 OF THE INCOME TAX ACT, 1961 ARE INIT IATED SEPARATELY FOR THE SAID DEFAULT. ITA NO.303(ASR)/2013 ITA NO.275(ASR)/2013 5 REAL ESTATE BUSINESS. AS STATED ABOVE, THERE HAS BEEN A HUGE DIFFERENCE O F RS.1,56,97,475/- IN THE GROSS RECEIPTS/CREDITS OF T HE ASSESSEES BANK ACCOUNT WHEN COMPARED TO HIS TOTAL CONTRACT RECEIPT S OF RS.3,95,27,072/- DURING THE PERIOD UNDER REFERENCE. ACCORDINGLY, DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E ASSESSEE WAS REQUESTED TO RECONCILE THE DIFFERENCE. IN HIS WRITT EN REPLY WHICH IS PLACED ON RECORDS, THE ASSESSEE JUSTIFIED/RECONCILE D THE VARIATION/DIFFERENCE ON ACCOUNT OF THE FOLLOWING TR ANSFER ENTRIES: REVERSE ENTRY RS.80,000/- DT.30.10.08 RS.55,000/- DT.26.12.08 RS.1,35,000/- AMOUNT OF LOAN TAKEN FROM MOHD. MAQBOOL BHAT R/O TRAL THROUGH BANK TRF. FROM THE A/C OF NOOR MOHD. TANGA & HIS FAMILY MEMBERS ALL RESIDENTS OF AZAD BASTI, NATIPORA, SRINAGAR. RS.84,50,000/- DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E ASSESSEE WAS REQUESTED TO FURNISH NECESSARY DETAILS AND NATU RE OF ALL THESE TRANSFER ENTRIES TO ESTABLISH HIS CONTENTION. IT HA S BEEN NOTICED THAT THE AMOUNT OF RS.84.50 LAKHS HAS BEEN RECEIVED/CREDITED IN THE ASSESSEES BANK ACCOUNT ON DIFFERENT DATES FROM THE A/C NOS. C D-2743, CD/2132, CD-2181 SB-10422 & SB-11171 OF J & K BANK LTD. B/O HSHS, SRINAGAR MAINTAINED BY SH. NOOR MOHD. TANGA, SH. MA NZOOR AHMAD TANGA, SH. LIAQAT TANGA & SH. FEROZ AHMAD TANGA, AL L RESIDENTS OF AZAD BASTI NATIPORA, SRINAGAR. THE AMOUNT. IN QUEST ION HAS BEEN RECEIVED BY BANK TRANSFERS AND LIABILITY OF THIS AM OUNT IS DULY REFLECTED/CLAIMED IN THE BALANCE SHEET AS AT 31.3.2 009 OF THE ASSESSEE. ALL THESE CONCERNED PARTIES HAVE TESTIFIED THE ADVA NCEMENT/TRANSFER OF THE AMOUNT INTO THE ASSESSEES ACCOUNT DURING THE C OURSE OF ASSTT. PROCEEDINGS. THE SOURCE OF THE AMOUNT WHICH IS SHOW N AS A LIABILITY IN THE BALANCE SHEET AS ON 31.3.09 AND DULY CONFIRMED BY THE PARTIES CONCERNED IS TAKEN AS EXPLAINED AND NO ADVERSE INFE RENCE IS DRAWN ON THIS POINT. SIMILARLY, THE EXPLANATION OFFERED IN RESPECT OF THE REVERSE ITA NO.303(ASR)/2013 ITA NO.275(ASR)/2013 6 ENTRIES OF RS.1,35,000/- HAS BEEN FOUND IN ORDER AN D AS SUCH NO ADVERSE VIEW IS TAKEN ON THIS ISSUE. THIS WAY THE A SSESSEE HAS BEEN ABLE TO JUSTIFY/EXPLAIN THE DIFFERENCE BY AN AMOUNT OF RS.85,85,000/- ONLY THEREBY LEAVING A BALANCE OF RS.71,12,475/- FO R WHICH NO SATISFACTORY EXPLANATION HAS BEEN OFFERED. IN RESPE CT OF THIS UNEXPLAINED BANK TRANSFER CREDITS, IT WAS SIMPLY S TATED THAT THE SAME REPRESENT RECEIPTS FROM REAL ESTATE BUSINESS. TE ASSESSEE WAS REPEATEDLY REQUESTED TO GIVE/FURNIS H DETAILS OF ALLEGED REAL ESTATE BUSINESS BUT HE HAS FAILED TO P ROVIDE THE DETAILS THEREOF. DURING THE COURSE OF THE ASSESSMENT PROCE EDINGS, IT WAS DETECTED THAT AN AMOUNT OF RS.45,90,000/- HAS COME INTO THE ACCOUNT OF THE ASSESSEE FROM THE ACCOUNT OF ONE MADASIR RAS OOL BHAT S/O GHULAM RASOOL BHAT R/O KHREW PULWAMA. SHRI MADASIR RASOOL WAS SUMMONED TO THIS OFFICE DURING THE COURSE OF THE AS SESSMENT PROCEEDINGS AND HE HAS ADMITTED THAT THE TRANSAC TION WITH THE ASSESSEE HAVE BEEN FOR REAL ESTATE BUSINESS CARRIED OUT BY THE ASSESSEE. ALTHOUGH THE ASSESSEE HAS FAILED TO GIVE ANY DETAILS OF THE ALLEGED REAL ESTATE BUSINESS CARRIED OUT BY HIM BUT CONSIDERING THE CONFIRMATION OF SH. MUDASIR AHMAD, THE CLAIM OF THE ASSESSEE THAT HE HAS ALSO RUN REAL ESTATE BUSINESS GETS STRENGTH. SI MILARLY IN RESPECT OF RECEIPTS WORTH RS.13 LACS FROM SH. GH. MOHD. BABA R /O NISHAT, IT HAS BEEN FOUND/VERIFIED THAT THE TRANSACTION HAS BEEN O N ACCOUNT OF REAL ESTATE BUSINESS OF THE ASSESSEE WHICH CLEARLY ESTA BLISH THE EXISTENCE OF REAL BUSINESS ACTIVITY BEING CARRIED OUT BY THE AS SESSEE DURING THE RELEVANT PREVIOUS YEAR, THE PROCEEDS/PROFITS OF WHI CH HAVE NOT BEEN DISCLOSED IN THE RETURN OF INCOME. VIDE THE SHOW CAUSE NOTICE/LETTER, THE ASSSESSEE WA S SPECIFICALLY REQUESTED TO FURNISH COMPLETE DETAILS OF THE REAL E STATE BUSINESS, FAILING WHICH THE INCOME FROM SUCH BUSINESS WOULD B E ESTIMATED BY APPLYING NP RATE OF 25% ON THE GROSS RECEIPTS WORKE D OUT. THE ASSESSEE HAD NOT PRODUCED ANY DETAILS OR ANY INFORM ATION PERTAINING TO THIS BUSINESS DESPITE GIVEN SUFFICIENT TIME FOR THE SAME AND THEREFORE, THE MERE STATEMENT/REQUEST FOR APPLYING N.P. OF 5% ON THE GROSS RECEIPTS FROM THE ASSESSEE IS FOUND DEVOID OF ANY MERIT AND SUBSTANCE AND AS SUCH DOES NOT DESERVE ANY CONSIDER ATION. ITA NO.303(ASR)/2013 ITA NO.275(ASR)/2013 7 CONSIDERING THE REPLY OF THE ASSESSEE AND THE FACTS AND CIRCUMSTANCES OF THE CASE IN ITS TOTALITY, THE GROS S RECEIPTS OF THE ASSESSEE FROM THE REAL ESTATE BUSINESS ARE TAKEN AT RS.71,12,475/- (REPRESENTING UN-RECONCILED BANK CREDITS AS WORKED OUT ABOVE) AND IN VIEW OF THE FAILURE OF THE ASSESSEE TO FURNISH ANY DETAILS/INFORMATION REGARDING THIS BUSINESS, IT WOULD BE FAIR, JUST AND REASONABLE TO APPLY A N.P. RATE OF 20% OF THE GROSS RECEIPTS OF RS.71,1 2,475/- TO DETERMINE THE INCOME FROM THIS SOURCE ENJOYED BY THE ASSESSEE DURING THE RELEVANT PERIOD, AS DULY CONFRONTED TO THE ASSESSEE VIDE THE SHOW CAUSE LETTER/DRAFT ASSESSMENT ORDER DATED 5.12.2011 . THE INCOME FROM THIS SOURCE OF INCOME TO BE ASSESSED IN THE HANDS O F THE ASSESSEE WORKS OUT TO RS.14,22,495/- FOR THE ASSESSMENT YEAR 2009-10. 4. THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND HIS FIN DINGS FOR THE SAKE OF CONVENIENCE IN PARAS 4.1 & 4.2 ARE REPRODUCED AS UN DER: I HAVE CONSIDERED THE FINDINGS OF THE AO IN THE A SSESSMENT ORDER AND SUBMISSION MADE BY THE APPELLANTS REPRESENTATI VE DURING THE COURSE OF HEARING OF THE CASE. THE AP APPLIED NET P ROFIT RATE OF 10% ON THE GROSS PAYMENTS RECEIVED RELYING UPON THE JUD GMENT OF THE ITAT, CHANDIGARH BENCH AND ALSO CONFIRMED BY THE HO NBLE P & H HIGH COURT IN THE CASE OF SHIVAM CONSTRUCTION CO. V S. ACIT, ITA NOS. 383 AND 384/204, 622/2005, 385 AND 386/2004 AND 728 /2005. THE A/R HAS RELIED UPON THE FINDINGS OF THE JURISDICTIO NAL TRIBUNAL IN THE CASE OF M/S. CONSTRUCTION ENGINEERS IN THE CASE OF CIVIL CONTRACTOR WHERE THE HONBLE ITAT, AMRITSAR APPLIED A RATE OF 6.5%. I FIND THAT THE REJECTION OF THE BOOKS OF THE APPELLANT IS CORR ECT OWING TO NON- PRODUCTION OF BILLS AND VOUCHERS ALONG WITH THE BOO KS OF ACCOUNTS DURING THE ASSESSMENT PROCEEDINGS, HOWEVER, THE RAT E OF 10% APPLIED ON THE GROSS RECEIPT IS EXCESSIVE AND UNREASONABLE. THE APPELLANT IS OPERATING IN SRINAGAR, KASHMIR AND DUE TO TOUGH TER RAIN AND BAD WEATHER CONDITIONS THERE IS AN INTERMILLENT STOPPAG E OF WORK LEADING TO HIGH COST OF INPUT AND LABAOUR. THEREFORE, IT WO ULD BE APPROPRIATE ITA NO.303(ASR)/2013 ITA NO.275(ASR)/2013 8 TO COMPARE WITH A CASE IN SIMILAR LOCATION. KEEPING IN VIEW THE FINDINGS OF THE JURISDICTIONAL TRIBUNAL IN THE CASE OF M/S. CONSTRUCTION ENGINEERS IN ITA NO.493(ASR)/2010 DECISION DATED 11 .05.2010 IN THE CASE OF A CIVIL CONTRACTOR WHERE THE ITAT AMRITSAR APPLIED A RATE OF 7% IT WOULD BE MORE JUSTIFIED TO ADOPT THE SAME RAT E. ACCORDINGLY, THE AO IS DIRECTED TO RESTRICT THE NET PROFIT RATE OF 7 % ON THE GROSS RECEIPT SUBJECT TO NO FURTHER DEDUCTION ON ACCOUNT OF SALAR Y AND INTEREST PAYABLE TO PARTNERS AND DEPRECIATION. 4.2. THE NEXT ISSUE TAKEN BY THE APPELLANT IN APPEA L APPLICATION IS OF RATE OF 20% ON ESTIMATED REAL ESTATE TURNOVER. THE AO DURING THE COURSE OF ASSESSMENT IN PROGRESSED NOTICED THAT THE RE WAS HUGE DIFFERENCE OF RS.1,56,97,475/- IN THE GROSS RECEIPT S/CREDITS OF THE ASSESSEES BANK ACCOUNT WHEN COMPARED TO HIS TOTAL CONTRACT RECEIPTS OF RS.3,95,27,072/-. THE ASSESSEE COULD EXPLAIN/JUS TIFY THE DIFFERENCE OF RS.85,85,000/- ONLY AND THERE WAS NO SATISFACTOR Y EXPLANATION WITH RESPECT TO THE AMOUNT OF RS.71,12,475/-. THE AO AFT ER GIVING DETAILED REASONS APPLIED A N.P. RATE OF 20% ON THE GROSS REC EIPTS AND DETERMINED THE PROFIT TO THE TUNE OF RS.14,22,095/- ON ACCOUNT OF REAL ESTATE BUSINESS AND TAXED THE SAME. DURING THE COUR SE OF HEARING THE A/R OF THE APPELLANT AGITATED THE APPLICATION OF PR OFIT RATE OF 20% BY STATING THAT THE APPLICATION OF RATE OF 20% IS TOTA LLY UNREALISTIC AND CITED A CASE OF ANSAL HOUSING AND CONSTRUCTION LTD. AND OTHER TWO CASES OF M/S. OMAXE LTD. AND LOK HOUSING CONSTRUCTI ON LTD. WHEREIN THE RATE OF PROFIT IS RANGING FROM 2.01 TO 11.05% F OR THE YEARS ENDING MARCH, 2009 TO MARCH, 2012. I HAVE GONE THROUGH TH E ASSESSMENT ORDER, CONTENTION OF THE A/R AND ALSO CONSIDERED TH E COMPARABLE CASES CITED BY THE APPELLANTS A/R. THE A/R IN THE APPEAL HAS SIMPLY STRESSED THE APPLICATION OF RATE OF PROFIT APPLIED AND NOT THE QUANTUM OF DIFFERENCE DETECTED BY THE A.O. THE APPELLANT CA SE CANNOT BE CONSIDERED WITH A REAL ESTATE GIANT LIKE ANSAL HOUS ING AND CONSTRUCTION LTD. AND OMAXE LTD. ETC. WHOSE TURNOVE R ARE IN MANY THOUSAND CRORES.THE OVERHEAD EXPENDITURE OF SUCH CO MPANIES ARE MANY FOLD AND DESPITE THAT THEY ARE SHOWING PROFIT IN THE RANGE OF 4.07% TO 11.05%. WHEREAS THE APPELLANT IS HAVING A VERY SMALL TURNOVER IN REAL ESTATE BUSINESS UNDER HIS OWN SUPE RVISION WHERE OVERHEAD EXPENSES ARE MINIMUM I.E. FINANCE, ADMINIS TRATIVE AND TECHNICAL CHARGES. KEEPING IN VIEW THE BOOM IN REA L ESTATE IN KASHMIR THE RATE OF 20% IS CONSIDERED APPROPRIATE A ND JUSTIFIED TO ITA NO.303(ASR)/2013 ITA NO.275(ASR)/2013 9 COVER THE PROFIT AND INVESTMENT IN THE SAID BUSINES S. THUS, ADDITION ON THIS COUNT IS CONFIRMED. 5. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE AS SESSEE IS A CIVIL CONTRACTOR AND AS PER THE WORK ORDERS/TENDER DOCUME NTS, HE IS ALLOWED A GROSS MARGIN OF 10% OVER THE COST OF MATERIAL WHICH INCLUDES THE OVERHEAD EXPENDITURE AS WELL. THIS FACT IS FURTHER CONFIRMED FROM THE RULES AND TERMINOLOGY OF STANDARD ANALYSIS OF RAT ES PUBLISHED BY GOVT. OF INDIA. AS PER THESE RULES, WHICH HAS TO BE FOLLOWED BY ALL GOVT. AGENCIES THE CONTRACTOR HAS TO BE PAID A GROSS PROF IT OF 10% OVER THE COST OF MATERIAL WHICH INCLUDES THE OVERHEAD EXPEND ITURE. IT WAS ARGUED THAT UNDER THE GIVEN SITUATIONS THE ASSESSEE COULD HAVE UNDER NO SITUATIONS & CIRCUMSTANCES AS EXPLAINED EARNED A NE T PROFIT RATE OF 10%. FURTHER, TO THE ABOVE THE HONBLE BOMBAY HIGH COURT IN A RECENT JUDGMENT IN THE CASE OF CIT VS. SUSHILA CHATURVEDI HAS HELD THAT IN CASE OF CIVIL CONTRACTORS WHERE 2% TAX IS DEDUCTED AT SO URCE IT IS REASONABLE TO ESTIMATE 6% OF GROSS RECEIPTS AS HIS INCOME. FUR THER THE JURISDICTIONAL TRIBUNAL OF ITAT, AMRITSAR HAS APPLIED A RATE OF 6 .5% IN THE CASE OF M/S. CONSTRUCTION ENGINEERS IN THE CASE OF CIVIL CO NTRACTOS % 5% IN THE CASE OF MOHAN SINGH. IN VIEW OF THE ABOVE SUBMISSI ONS, THE LD. COUNSEL ITA NO.303(ASR)/2013 ITA NO.275(ASR)/2013 10 PRAYED THAT THE ADHOC ADDITIONS MADE BY THE A.O. B E DELETED AND A MAXIMUM N.P. RATE OF 5% BE APPLIED. 5.1. THE LD. COUNSEL FURTHER ARGUED WITH REGARD TO N.P. RATE OF REAL ESTATE BUSINESS THAT THE LD. CIT(A) HAS REJECTED T HE COMPARATIVE CASES OF M/S. ANSAL HOUSING & CONSTRUCTION LTD. & M/S. OMAXE LTD. REFLECTING A PROFIT OF 4.07% TO 11.05% ON THE PLEA THAT THERE IS A HUGE QUANTUM DIFFERENCE IN TURNOVER. IT WAS FURTHER STATED THAT THE CIT(A) HAS ERRED THAT THE ASSESSEE IS A SMALL BUSINESSMAN & A N.P. RATE O F 20% IS UNTHINKABLE. IN FACT, THE N.P. OF THE ASSESSEE LOGICALLY & REASO NABLY SHOULD BE LESS THAN THE N.P. PERCENTAGE OF THE TWO REFERRED COMPAN IES BUT AT THE SAME TIME LD. COUNSEL FOR THE ASSESSEE VERY EMPHATICALLY ARGUED TO APPLY A NET PROFIT RATE OF 15%, SINCE ON THE IDENTICAL FACT AS THAT OF ASSESSEE, THE AO, ANANTNAG, KASHMIR IN THE CASE OF MUDASIR RASOOL BHA T HAS APPLIED A NET PROFIT RATE OF 15% AND THAT TOO FOR THE SAME ASSESS MENT YEAR AND INCIDENTALLY THE AO MR. NOOR-UD-DIN IS THE SAME, IN COME TAX OFFICER. THEREFORE, THE SAME AO UNDER IDENTICAL CIRCUMSTANCE S CANNOT ASSESS DIFFERENT N.P. RATES. THEREFORE, THE LD. COUNSEL FO R THE ASSESSEE PRAYED TO DIRECT THE AO TO APPLY A N.P. RATE OF 15%. A COPY O F ASSESSMENT ORDER IN THE SAID CASE WAS PLACED ON RECORD AND COPY GIVEN T O THE LD. DR. ITA NO.303(ASR)/2013 ITA NO.275(ASR)/2013 11 6. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AS REGARDS INVOKING THE PROVISIONS OF SECTIO N 145(3) OF THE ACT, THE SAME IS NOT IN DISPUTE BEFORE US. AS REGARDS THE AP PLICATION OF NET PROFIT RATE, THE AO WHILE MAKING APPLICATION OF N.P. RATE HAS NOT GIVEN THE BASIS OF THE CASES RELIED UPON WHETHER SUCH CASES ARE COMPARABLE WITH THE FACTS AND CIRCUMSTANCES OF THE PRESENT CAS E. THE LD. CIT(A) ALSO HAS NOT GIVEN THE FACTS AND CIRCUMSTANCES OF THE C OMPARABLE CASES WHETHER THEY ARE IDENTICAL OR SIMILAR TO THE PRESEN T FACTS AND CIRCUMSTANCES OF THE CASE. IN THE FACTS AND CIRCUMS TANCES OF THE PRESENT CASE AND DECISION OF THIS BENCH IN THE CASE OF MO HAN SINGH CONTRACTOR, GURDASPUR VS. ITO, GURDSPAUR IN ITA NO. 59(ASR)/201 2 FOR THE A.Y. 2008-09 DATED 05.06.2012 AND THE EXPLANATION GIVEN BY THE ASSESSEE, A N.P. RATE OF 5% ON THE GROSS CONTRACT RECEIPTS WOUL D BE REASONABLE. ACCORDINGLY, THE AO IS DIRECTED TO APPLY NET PROFIT RATE OF 5% ON THE GROSS CONTRACT RECEIPTS DECLARED BY THE ASSESSEE. A CCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE MODIFIED. 7.1. AS REGARDS THE NET PROFIT RATE ON THE REAL EST ATE BUSINESS, THE AO OR THE LD. CIT(A) HAS NOT CONSIDERED COMPARATIVE CASES OF M/S. ANSAL HOUSING ITA NO.303(ASR)/2013 ITA NO.275(ASR)/2013 12 & CONSTRUCTION LTD. M/S. OMAXE LTD, WHO HAVE DECLAR ED N.P. RATE OF 4.07% TO 11.05% AND WITHOUT ANY BASIS HAVE MADE APPLICATI ON OF N.P. RATE OF 20% ON THE REAL ESTATE BUSINESS. WHEREAS THE LD. AR, MR . UPENDER BHATT,CA HAS BROUGHT ON RECORD THE COPY OF ASSESSMENT ORDER IN THE CASE OF MUDASIR RASOOL BHAT FOR THE SAME ASSESSMENT YEAR UNDER IDEN TICAL FACTS WHERE A NET PROFIT RATE OF 15% HAS BEEN APPLIED BY THE SAID A O. THE SAME WAS NOT REBUTTED BY THE LD. DR AND IT APPEARS THAT LD. DR H AS NOTHING TO SAY ABOUT THE APPLICABILITY OF N.P. RATE OF 15% IN SUCH BUSIN ESS. THEREFORE, WE DIRECT THE AO TO APPLY A NET PROFIT RATE OF 15% ON ESTIMA TED REAL ESTATE TURNOVER. THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE MODIFI ED ACCORDINGLY. THE AO IS DIRECTED TO AMEND HIS ORDER AS DIRECTED HEREINAB OVE. THUS, BOTH THE APPEALS OF THE ASSESSEE AND THE REVENUE ARE ALLOWED PARTLY. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE IN ITA NO.303(ASR)/2013 AND REVENUE IN ITA NO.275(ASR)/201 3 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17TH JANUARY, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17TH JANUARY, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: SH. ABDUL JABBAR BHAT, SRINAGAR. ITA NO.303(ASR)/2013 ITA NO.275(ASR)/2013 13 2. THE ITO ANANTNAGAR, SRINAGAR. 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