ACIT, Kota V. SHRI RAMESH CHAND SHARMA, Kota

ITA 287/JPR/2012

• Counselvise Citation: 28723114 RSA 2012
• Duration Of Justice: 1 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 26-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: G C JAIN
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI HARI OM MARATHA AND SHRI N.K. SAI NI) ITA NO. 287/JP/2012 ASSESSMENT YEAR : 2005-06 PAN: AGWPS 2292 J THE ACIT VS. SHRI RAMESH CHAND SHARMA CIRCLE- 1 357, SHOPPING CENTRE KOTA KOTA (APPELLANT) (RESPONDENT) C.O. NO.33/JP/2012 (ARISING OUT OF ITA NO. 287/JP/2012) ASSESSMENT YEAR : 2005-06 PAN: AGWPS 2292 J SHRI RAMESH CHAND SHARMA VS. THE ACIT, 357, SHOPPING CENTRE CIRCLE- 1 KOTA KOTA (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI D.C. SHARMA ASSESSEE BY : SHRI G.C. JAIN DATE OF HEARING: 22-01-2014 DATE OF PRONOUNCEMENT: 31-01-2014 ORDER PER HARI OM MARATHA, JM:- THE APPEAL OF THE DEPARTMENT AND THE C.O. OF THE A SSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), KOTA DATED 20-01-2012 FOR THE ASSESSMENT YEAR 2005-06. 2 2.1 THE REVENUE HAS RAISED THE SOLITARY GROUND AS U NDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN:- (I) DIRECTING TO APPLY NET PROFIT RATE OF 8.5% BY IGNORING THE FACT THAT HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. JAIN CONSTRUCTION COMPANY HAS UPHELD T HE NET PROFIT RATE OF 12.5% 2.2 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS I N HIS CROSS OBJECTION. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN:- (I) IN APPLYING NET PROFIT RATE OF 8.5% IN SELF CON TRACT ACCOUNT DESPITE THE FACT THAT SUCH CONTRACT RECEIPT S HAD SUBSTANTIALLY INCREASED AS COMPARED TO THE PRECEDIN G YEARS. (II) IN NOT PROPERLY CONSIDERING THE FACT OF INCREA SE IN LABOUR AND MATERIAL COST WHILE APPLYING NET PROFIT RATE OF 8.5% AS AGAINST 4.92% DECLARED. 2.3 BRIEFLY STATED, THE FACTS OF THE CASE ARE THE A SSESSEE FILED HIS RETURN OF INCOME ON 30-10-2005 DECLARING TOTAL INCOME OF RS. 12,95,070/-. THE ASSESSEE DERIVES THE INCOME FROM CIVIL CONSTRUCTION BUSINESS. DURING THE YEAR, THE ASSESSEE HAS EXECUTED ROAD CONSTRUCTION W ORK. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I.T. ACT, 1961 (THE AC T FOR SHORT) ON 26-11- 2007 BY COMPUTING TAXABLE INCOME AS UNDER:- 3 PROFIT FROM BUSINESS PROFIT @ 9% ON RECEIPTS OF RS. 30675212/- RS. 27,6 0,769/- LESS: (I) DEPRECIATION RS. 1,74,132/- RS. 25,.86,637/- INCOME FROM OTHER SOURCES AS SHOWN IN RETURN RS. 70,942/- GROSS TOTAL INCOME RS. 26,57,579/- LESS: DEDUCTION U/S 80L RS. 12,000/- TOTAL INCOME RS. 26,45,579/- 2.4 AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE T HE LD. CIT(A) AND THE LD. CIT(A) HAS GIVEN A PART RELIEF TO THE ASSESSEE THAT IS WHY BOTH THE PARTIES ARE AGGRIEVED. IN FACT, THE NECESSARY FACTS OF THE COMMON ISSUE RAISED IN THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF T HE ASSESSEE ARE THAT THE ASSESSEE HAS DECLARED TOTAL CONTRACT RECEIPT AT RS. 3,06,75,212/- AND HAS DECLARED THE PROFIT AT RS. 12,36,125/-. ON THESE RE CEIPTS OF THE YEAR BEFORE DEPRECIATION, THE ASSESSEE HAS SHOWN THE NET PROFIT AT RS. 14,10,257 WHICH IS 4.59% AND AFTER DEPRECIATION NET PROFIT RATE IS AT 4.03%. THE COMPARATIVE CHART OF GROSS RECEIPTS, NET PROFIT AND NET PROFIT RATE FOR THE LAST THREE YEARS OF THE ASSESSEE IS AS UNDER:- ASSESSMENT YEAR GROSS CONTRACT RECEIPTS NET PROFIT NET PROFIT RATE 2002-03 5603373 276111 4.93% 2003-04 7318484 293248 4% 2004-05 9464496 478297 5.05% 2005-06 30675212 1236125 4.03% 4 FROM THE ABOVE, THE AO HAS NOTICED THAT THERE IS A SMALL FALL IN THE NET PROFIT RATE DECLARED AS COMPARED TO EARLIER YEAR. THE ASSE SSEE HAS EXPLAINED THIS FALL BY EXPLAINING THAT DUE TO CUT THROAT COMPETITION IN THIS BUSINESS, THE ASSESSEE HAD TO DECLARE LOWER NET PROFIT RATE. THE INCREASE IN THE PRICE OF MATERIAL AND LABOUR IS ALSO A FACTOR WHICH CONTRIBUTES TO DECLIN E IN THE NET PROFIT RATE. THE AO TEST CHECKED THE BOOKS OF ACCOUNT OF THE ASSESSE E AND HAS MADE FOLLOWING OBSERVATIONS. (I) NO DAY TO DAY STOCK REGISTER FOR MATERIAL RECEI VED AND CONSUMED HAS BEEN MAINTAINED. THERE IS NO RECORD T O VERIFY THAT THE ENTIRE MATERIAL CLAIMED TO HAVE PURCHASED HAVE BEEN UTILIZED FOR THE PURPOSE OF BUSINESS OF THE ASSESSE E . (II) BILTY/ CHALLANS/ TRANSPORTATION DETAILS FOR GO ODS RECEIVED HAVE NOT BEEN MAINTAINED. (III) SITEWISE DETAILS OF WORK DONE AND RELATED EXP ENSES ARE NOT AVAILABLE . (IV) FURTHER, THE VERIFICATION OF SUNDRY CREDITORS FOR LABOUR / SAND IS NOT SUBJECT TO VERIFICATION. EVEN THE IDENT ITY IS NOT SUBJECT TO VERIFICATION. EVEN THE IDENTITY IS NOT S UBJECT TO VERIFICATION. (V) NO WORK IN PROGRESS HAS BEEN SHOWN NOR ANY STOC K HAS BEEN MAINTAINED. (VI) THERE HAS BEEN A DECLINE IN NET PROFITS WHICH IS NOT SATISFACTORY EXPLAINED. 5 (VII) NO BILLS FOR RABBAL, MALBA,GITTI ETC. HAVE BE EN MAINTAINED OR PRODUCED. ACCORDINGLY, THE AO REJECTED THE BOOKS OF ACCOUNT O F THE ASSESSEE AND HAS INVOKED THE PROVISION OF SECTION 145(3) OF THE ACT. THE AO AFTER REJECTION OF BOOKS OF ACCOUNT HAS APPLIED THE NET PROFIT RATE OF 9% ON THE GROSS CONTRACT RECEIPTS WHICH IS FURTHER SUBJECT TO VERIF ICATION. 2.5 AGGRIEVED, THE ASSESSEE CHALLENGED THIS FINDING S AND THE LD. CIT(A) HAS ADOPTED THE NET PROFIT RATE OF 8.5% . 2.6 NOW THE ASSESSEE IS FURTHER AGGRIEVED AND HAS T AKEN THE SAME AND SIMILAR ARGUMENTS BEFORE US WHICH WERE TAKEN BEFORE THE LD. CIT(A). HOWEVER, THE LD. DR HAS SUPPORTED THE ORDER OF THE AO. 2.7 AFTER CONSIDERING THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSING THE MATERIALS AVAILABLE ON RECORD, WE ARE OF THE CONSIDERED OPINION THAT AFTER REJECTION OF BOOKS OF ACCOUNT AS PER SET TLED LAW, THE NET PROFIT RATE DECLARED IN IMMEDIATELY PRECEDING YEAR I.E. 2004-0 5 HAS TO BE APPLIED. FOR ASSESSMENT YEAR 2004-05, THE NET PROFIT RATE DECLAR ED AND ACCEPTED IS 5.05%. ACCORDINGLY, BY FOLLOWING THE SETTLED PRINCIPLES OF LAW, WE ADOPT THE NET PROFIT RATE AT 5.05% AND PARTLY ALLOW THE CROSS OBJ ECTION OF THE ASSESSEE AND CONCOMITANTLY THE APPEAL OF THE REVENUE STANDS DISM ISSED. 6 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED AND THE C.O. OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 -01-201 4 SD/- SD/- (.N.K. SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMEBR JAIPUR DATED: 31 ST JAN 2014 *MISHRA COPY FORWARDED TO:- BY ORDER 1. THE ACIT, CIRCLE- 1, KOTA 2. SHRI RAMESH CHAND SHARMA, KOTA 3. THE LD. CIT(A) 4. THE LD. CIT 5. THE DR 6. THE GUARD FILE (IT NO.287/JP/12) A.R., ITAT, JAIPUR 7 8