DCIT, Patiala V. Sh. Reetu Singh Cheema, Patiala

ITA 284/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77118 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 19-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR AMA RVEER SINGH
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.284/CHD/2014 ASSESSMENT YEAR : 2009-10 THE DY. COMMISSIONER OF VS SHRI REETU SINGH CHEEM A, INCOME TAX, 59-B, SARABHA NAGAR, CIRCLE, BHADSON ROAD, PATIALA. PATIALA. PAN : AEKPC8430Q (APPELLANT) (RESPONDENT) APPELLANT BY : DR. AMARVEER SINGH RESPONDENT BY : NONE DATE OF HEARING : 13.05.2014 DATE OF PRONOUNCEMENT : 29.05.2014 O R D E R PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF T HE COMMISSIONER OF INCOME TAX (APPEALS), PATIALA DATED 27.01.2014 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF TH E INCOME-TAX ACT, 1961 ( 'THE ACT' FOR SHORT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT UPHOLDING NET PROFIT @10% APPLIED BY T HE AO AFTER SUSTAINING THE ACTION OF THE AO REGARDING REJECTION OF BOOKS O F ACCOUNT U/S 145(3) OF THE INCOME TAX ACT, 1961 FOR THE REASONS MENTION ED IN THE ASSESSMENT ORDER, IN VIEW OF THE NUMEROUS DEFICIENCIES POINTED OUT BY THE AO IN THE ACCOUNTS. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN APPLYING THE NET PROFIT OF 6% INSTEAD OF 10% ADOPTED BY THE AO, WITHOUT APPRECIATING THAT THE RATE OF NET P ROFIT OF 10% HAS 2 BEEN HELD TO BE REASONABLE IN THE CASE OF CIT VS. M /S SHIVAM CONSTRUCTION CO. IN ITA NO. 197 OF 2007 DATED 07.05 .2007 SUBJECT TO , ALLOWING OF INTEREST AND SALARY TO THE PARTNERS AND DISALLOWING THE DEPRECIATION. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN FOLLOWING THE DECISION IN THE CASE OF M/S HARBHAJAN SINGH & CO., SANGRUR PARTICULARLY WHEN THE DEPARTMENT IS IN APPEAL BEFORE THE HON'BLE HIGH COURT AGAINST THE SAID DECISION, A ND THERE IS NO RES- JUDICATA IN INCOME TAX PROCEEDINGS. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN GIVING RELIEF BY ASSUMING THAT A SUB-C ONTRACTOR'S MARGIN WILL BE LESS THAN THAT OF A CONTRACTOR WHICH ASSUMP TION IS WITHOUT ANY BASIS. 3. THE ONLY ISSUE RAISED BY THE REVENUE IS AGAINST THE ESTIMATION OF PROFITS IN THE HANDS OF THE ASSESSEE BY APPLYING NET PROFIT RATE OF 6% BY THE COMMISSIONER OF INCOME TAX (APPEALS) AS AGAINST 10% APPLIED BY THE ASSESSING OFFICER. 4. THE APPEAL WAS FIXED FOR HEARING ON 13.05.2014 A ND NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY APPLICAT ION WAS MOVED FOR ADJOURNMENT. IN VIEW OF THE SMALLNESS OF ISSUE , WE PROCEED TO DECIDE THE PRESENT APPEAL AFTER HEARING LD. DR FOR THE REVENUE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE WAS A CONTRACTOR AND HAD CARRIED OUT SUB-CONTRACT WORK OF M/S M.G. CONTRACTORS PVT. LTD. THE ASSESSING OFFICER NOTED THAT AS AGAINST GROSS RECEIPTS OF RS. 2.87 CR, THE ASSESSEE HAD DEC LARED NET PROFIT OF RS. 14,61,123/- DECLARING NET PROFIT RATE OF RS. 5.08%. FURTHER, VARIOUS DISCREPANCIES WERE FOUND IN THE BO OKS OF ACCOUNT I.E. NON-PRODUCTION OF SALARY REGISTER AND WAGES RE GISTER, EVIDENCING EXPENDITURE OF RS. 78,45,000/-; NO BILLS AND VOUCHERS AGAINST DIESEL EXPENSES OF RS.1.46 CR EXCEPT THE CL AIM THAT IT HAD 3 USED ABOUT 9 TIPPERS, ONE TRACTOR, GENERATOR, ROAD ROLLER AND WATER PUMP SET. FURTHER, THE ASSESSEE HAD NOT MAINTAINED ANY STOCK REGISTERS IN RESPECT OF THE MATERIAL PURCHASED AND CONSUMED IN CONTRACT WORK; NO BILLS OR VOUCHERS WERE MAINTAINED IN RESPECT OF SOIL EXPENSES OF RS. 2,50,000/-, REPAIR AND MAINTEN ANCE EXPENSES OF RS. 6,48,064/-, WATER CHARGES OF RS.1,00,000/-. IN VIEW OF THE ABOVESAID DISCREPANCIES, THE ASSESSEE WAS SHOW CAUS ED AS TO WHY THE BOOKS OF ACCOUNT SHOULD NOT BE REJECTED UNDER S ECTION 145(3) OF THE ACT. THE ASSESSING OFFICER ALSO PROPOSED TH E APPLICATION OF NET PROFIT RATE OF 10%. IN RESPONSE, THE ASSESS EE FILED REPLY WHICH IS REPRODUCED AT PAGES 6 TO 8 OF THE ASSESSME NT ORDER AND AFTER GOING THROUGH THE OBJECTIONS OF THE ASSESSEE, THE ASSESSING OFFICER NOTED THAT IN RESPECT OF THE LABOUR PAYMENT S, THE PLEA OF THE ASSESSEE THAT IT HAD ENGAGED A PERSON ON CONTRA CT, IF ACCEPTED WOULD MAKE THE ASSESSEE LIABLE TO DEDUCT TAX AT SOU RCE OUT OF SUCH PAYMENTS MADE ON ACCOUNT OF WAGES/SALARY AND AS THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE, THE SAID PAYMEN TS WERE NOT ALLOWABLE IN VIEW OF THE PROVISIONS OF SECTION 40(A )(IA) OF THE ACT. FURTHER, THE ASSESSEE FAILED TO PRODUCE THE V OUCHERS OF DIESEL EXPENDITURE EXCEPT TO FURNISH DAY-TODAY EXPE NDITURE TO CLAIM THAT IT HAD MADE THE SAID PAYMENT DIRECTLY TO THE CONTRACTOR. IN RESPECT OF THE BALANCE EXPENDITURE ALSO, THE ASS ESSEE FAILED TO FURNISH ANY VOUCHERS AND HENCE, BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED AND NET PROFIT RATE OF 10% WAS APPLIE D RELYING UPON THE JUDGEMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT, LUDHIANA V SHIVAM CONSTRUCTION COMPANY (CITATI ON MISSING) WHICH WAS RESTRICTED BY THE COMMISSIONER OF INCOME TAX (APPEALS) TO 6%, THOUGH REJECTION OF BOOKS OF ACCOU NT WAS UPHELD BY THE COMMISSIONER OF INCOME TAX (APPEALS) UNDER S ECTION 4 145(3) OF THE ACT. THE ASSESSEE BEFORE US WAS A SUB -CONTRACTOR AND WAS CARRYING ON THE CONTRACT WORK WHICH WAS AWA RDED TO ANOTHER CONTRACTOR. IN THE CASE OF THE SUB-CONTRAC TOR, THE MARGIN OF PROFIT IS ADMITTEDLY LESS, HOWEVER IN THE CASE O F THE ASSESSEE WE FIND THAT THE ASSESSEE HAD DECLARED NP RATE OF 5 .08% ONLY AND THE ASSESSING OFFICER HAD POINTED OUT VARIOUS DISCR EPANCIES IN THE BOOKS OF ACCOUNT AND NO EVIDENCE WAS PRODUCED BY TH E ASSESSEE VIS--VIS ITS CLAIM OF EXPENDITURE UNDER VARIOUS HE ADS. IN THE ENTIRETY OF THE SAID FACTS AND CIRCUMSTANCES, WHERE THE ASSESSEE HAS FAILED TO JUSTIFY ITS CLAIM OF LOWER NP RATE AN D/OR FAILED TO PRODUCE VOUCHERS IN RESPECT OF VARIOUS EXPENDITURES . THERE IS NO RECOURSE LEFT BUT TO ESTIMATE THE INCOME IN THE HAN DS OF THE ASSESSEE AND IN THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT NET PROFIT RATE OF 7.5% SHOULD BE APPLIED IN O RDER TO COMPUTE THE INCOME OF THE ASSESSEE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RE-COMPUTE THE INCOME IN THE HANDS OF TH E ASSESSEE BY APPLYING NET PROFIT RATE OF 7.5% ON THE GROSS RECEI PTS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THE GRO UNDS OF APPEAL RAISED BY THE REVENUE ARE THUS, PARTLY ALLOWED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH MAY, 2014. SD/- SD/- ( T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29TH MAY, 2014 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR. ASSISTANT REGISTRAR TAT,CHD