ITO, Jaipur V. FKUMAWAT CONTRACTORS, Jaipur

ITA 300/JPR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99517 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 23-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PREMLATA S DH R
• Keywords: Rejection of books of accounts; Depreciation; Corroborative evidences
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NOS. 300/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2009-10 . THE INCOME-TAX OFFICER, WARD 3(1), JAIPUR. CUKE VS. M/S. KUMAWAT CONTRACTORS, 48, RAMNAGAR, KALWAR ROAD, JAIPUR.L LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AABFK 8231 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI KAILASH MANGAL (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI S.L. JAIN & MS PREMLATA (ADVOCATES) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 26.10.2015. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 27/11/2015. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THE APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF LD. CIT (A)-I, JAIPUR DATED 07.02.2014. THE SOLITARY GROUND RAISED IN THE APPE AL IS AS UNDER :- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN ESTIMATING THE NET PRO FIT @ 6% AGAINST NET PROFIT RATE OF 8% ESTIMATED BY AO WHILE UPHOLDING T HE REJECTION OF BOOKS OF ACCOUNT U/S 145(3) OF THE ACT. 2 ITA NO. 300/JP/2014 A.Y. 2009-10. ITO VS. M/S. KUMAWAT CONTRACTORS. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 30.09.2009 DECLARING TOTAL INCOME OF RS. 9,09,120/- . THE CASE WAS SELECTED FOR SCRUTINY AND ORDER WAS PASSED UNDER SECTION 143(3) OF THE IT ACT ON 07.12.2011 DETERMINING THE INCOME OF THE ASSESSEE AT RS. 30,37,790/-. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION WORKS. DURING THE YE AR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN NET PROFIT AT RS. 22,59,290/- BEFORE INTE REST AND REMUNERATION TO PARTNERS ON TOTAL CONTRACT RECEIPTS OF RS. 5,48,49,503/- WHICH GIVES A NP RATE OF 4.12% FROM CIVIL CONSTRUCTION WORKS. 2.1. THE A.O. WHILE MAKING THE ASSESSMENT, NOTICED THAT THE ASSESSEE HAS NOT PRODUCED COMPLETE BILLS OF PURCHASES OF MATERIALS E XPENSES AND VOUCHERS OF EXPENSES. EVEN THE DETAILS OF CONSTRUCTION MATERIAL PURCHASED WERE NOT MAINTAINED. IT WAS ALSO NOTICED THAT PAYMENTS WERE MADE TO LABOUR IN CASH A ND NO SUPPORTING EVIDENCE I.E. COMPLETE POSTAL ADDRESSES OF LABOUR HAS BEEN MAINTA INED. THE ASSESSEE HAS ALSO NOT MAINTAINED WAGES REGISTER, AND IN THE ABSENCE OF PR OPER AND COMPLETE VOUCHERS, WAGES SHOWN TO HAVE BEEN PAID TO LABOUR ARE NOT VERIFIABL E. 2.2. THE ASSESSEE HAS SHOWN CLOSING STOCK/WORK-IN-P ROGRESS AT RS. 1,55,560/-, WHICH ADMITTEDLY VALUED ON ESTIMATION. THE AO NOTICED TH AT ASSESSEE HAS NEITHER MAINTAINED DAY-TO-DAY STOCK REGISTER NOR MAINTAINED QUANTITATI VE TALLY OF STOCK CONSUMPTION ON EACH PROJECT. EVEN, THE ASSESSEE HAS NOT FURNISHED T HE CONTRACT-WISE/SITE-WISE DETAILS OF DIMENSION & SPECIFICATION OF WORKS. THE ASSESSEE H AS ALSO SHOWN ITS INABILITY TO FURNISH SITE-WISE BIFURCATION OF STOCK AND WORK-IN-PROGRESS . IN ABSENCE OF DAY-TO-DAY STOCK 3 ITA NO. 300/JP/2014 A.Y. 2009-10. ITO VS. M/S. KUMAWAT CONTRACTORS. REGISTER WAS WELL AS SITE-WISE CONSUMPTION OF RAW M ATERIAL ON DAILY BASIS AND SITE-WISE OF WIP, THE CORRECT PROFITS OF BUSINESS CANNOT BE A SCERTAINED. THE A.O. ALSO NOTICED THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BILLS/V OUCHERS OR SUPPORTING DOCUMENTS IN RESPECT OF EXPENSES INCURRED IN CONNECTION WITH TRA VELLING, DIESEL & FUEL CHARGES, OFFICE EXPENSES, TELEPHONE & MOBILE EXPENSES. PAYMENTS IN RESPECT OF THESE EXPENSES WERE MADE IN CASH. IN VIEW OF THE ABOVE DEFECTS POINT ED OUT, THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE ASKING AS TO WHY BOOKS OF AC COUNT SHOULD NOT BE REJECTED BY INVOKING PROVISIONS OF SECTION 145(3) OF THE IT ACT AND NET PROFIT RATE SHOULD NOT BE ESTIMATED ON DECLARED GROSS. BEING NOT SATISFIED W ITH THE REPLY FURNISHED BY THE ASSESSEE IN RESPONSE TO SHOW CAUSE, THE AO BY INVOK ING PROVISIONS OF SECTION 145(3), REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND BY APPLYING NET PROFIT RATE OF 8% ON THE GROSS RECEIPTS, ESTIMATED THE ASSESSEES PROFIT AT RS. 43,87,960/-. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT (A), WHO REDUCED THE NET PROFIT RATE TO 6% AS AGAINST 8% DET ERMINED BY THE AO AND ALLOWED RELIEF ACCORDINGLY BY OBSERVING AS UNDER :- 4. I HAVE CONSIDERED FACTS OF THE CASE. IT IS SEE N THAT THE AO HAS REJECTED THE BOOKS OF ACCOUNT ON THE GROUND THAT CO MPLETE BOOKS OF ACCOUNT WERE NOT PRODUCED BY THE APPELLANT. HE HAD ONLY FURNISHED COPY OF LEDGER ACCOUNT AND VOUCHERS OF SOME EXPENSES. MO REOVER, THE CLOSING STOCK/WORK-IN-PROGRESS WAS VALUED ONLY ON ESTIMATIO N AND DAY TO DAY STOCK REGISTER WAS NOT MAINTAINED. IT IS NOTICED TH AT EVEN AT THE APPELLATE STAGE THE APPELLANT HAS GIVEN ONLY GENERAL ARGUMENT S TO SHOW AS TO WHY THE BOOKS OF ACCOUNT COULD NOT BE MAINTAINED. IT IS , HOWEVER, CLEAR THAT 4 ITA NO. 300/JP/2014 A.Y. 2009-10. ITO VS. M/S. KUMAWAT CONTRACTORS. FOR WANT OF THE RELEVANT DOCUMENTS SUCH AS STOCK RE GISTER ETC. THE INCOME OF THE APPELLANT CANNOT BE COMPUTED PROPERLY ON THE BASIS OF THE BOOKS OF ACCOUNT MAINTAINED BY IT. HENCE, THE REJECTION OF B OOKS OF ACCOUNT BY THE AO IS UPHELD. 4.1. SO FAR AS THE ESTIMATION OF INCOME IS CONCERNE D, IT IS SEEN THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 2008 -09 NP RATE OF 6% WAS APPLIED BY MY PREDECESSOR. THE NP RATE AS PER B OOKS IS 5.48%. AS HELD BY THE HONBLE RAJASTHAN HIGH COURT IN THE CAS E OF GOTAN LIME KHANIJ UDYOG (256 ITR 245), THE ASSESSEES OWN CASE IS THE BEST COMPARABLE CASE FOR ESTIMATING ITS INCOME. CONSIDERING THE OVE RALL FACTS AND CIRCUMSTANCES OF THE CASE, IT WOULD BE APPROPRIATE TO DETERMINE THE INCOME BY APPLYING THE NP RATE OF 6%, AS AGAINST 8% , DETERMINED BY THE AO BEFORE DEPRECIATION, INTEREST AND REMUNERATION I N THE YEAR UNDER CONSIDERATION. THE AO IS DIRECTED TO DETERMINE THE INCOME ACCORDINGLY. 4. NOW THE REVENUE IS BEFORE US. 5. THE LD. D/R FOR THE REVENUE HAS SUBMITTED THAT T HE ORDER PASSED BY LD. CIT (A) IS NOT LEGAL AS THE LD. CIT (A) HAS ESTIMATED THE NP R ATE OF 6% AGAINST THE PROFIT RATE OF 8% ESTIMATED BY THE AO. THE LD. D/R HAS RELIED UPON THE ORDER PASSED BY THE A.O. 6. ON THE CONTRARY, THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE BOOKS OF ACCOUNT WERE WRONGLY REJECTED BY THE AO UNDER SECT. 145(3) OF THE IT ACT. THE PURCHASES WERE MADE MOSTLY FROM ILLITERATE PERSONS WHO ARE CARRYING ON THE BUSINESS IN AN UNORGANIZED MANNER. THE MAIN ITEMS OF PURCHASES ARE CONSISTING OF STONE, BAJRI, RODI, GITTI, LIME, BRICKS ETC. THE SELLERS OF THESE ITEMS DID NOT MAINTAIN REGULAR BILL BOOKS OF THESE ITEMS AND SUPPLY THE MATERIAL DIRECTLY FRO M THEIR MINES AND CRASHER SITES AND 5 ITA NO. 300/JP/2014 A.Y. 2009-10. ITO VS. M/S. KUMAWAT CONTRACTORS. THE ASSESSEE AFTER PURCHASING THE SAME, THE SAME WE RE SENT TO THE SITE AND CONSUMED THERE. IT WAS FURTHER CONTENDED THAT IT IS NOT POSS IBLE TO MAINTAIN THE RECORD AND REGULAR BOOKS OF ACCOUNT ON ACCOUNT OF PECULIAR NATURE OF B USINESS. THE TRANSPORTATION IS ALSO DONE BY THESE PERSONS. IT WAS FURTHER CONTENDED THA T THE ASSESSEE TRIED TO MAINTAIN SUPPORTING VOUCHERS AND RECORDS AS FAR AS POSSIBLE. IT WAS FURTHER CONTENDED THAT THE STOCK REGISTER COULD NOT BE MAINTAINED IN VIEW OF T HE NATURE OF WORK. ON OUR POINTED ENQUIRY WHETHER THE ASSESSEE IS CHALLENGING THE REJ ECTION OF BOOKS OF ACCOUNT U/S 145(3), THE LD. A/R FOR THE ASSESSEE HAS SUBMITTED HE HAS NOT FILED ANY CROSS OBJECTION AGAINST THE ORDER PASSED BY LD. CIT (A). HE HAS FU RTHER CONTENDED THAT IN CASE OF REJECTION OF BOOKS, THE PAST HISTORY OF THE ASSESSE E IS REQUIRED TO BE FOLLOWED AND IN FACT THE LD. CIT (A) HAS ONLY FOLLOWED THE PAST HIS TORY AND ESTIMATED THE NET PROFIT BASED ON PAST HISTORY. 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FOR THE ASSESSMENT YEAR 2008-09, THE COORDINATE BEN CH OF THE TRIBUNAL VIDE ORDER DATED 23.09.2015 HAD UPHELD THE NP RATE OF 6% BEFOR E DEPRECIATION, INTEREST AND REMUNERATION TO PARTNERS. WE DO NOT FIND ANY REASON TO DISAGREE WITH THE FINDING OF THE COORDINATE BENCH DECISION. THEREFORE, WE APPLY THE SAME REASONING FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2009-10. THERE IS NO MATERIAL CHANGE IN FACTS AND CIRCUMSTANCES OF THE CASE, AND THE DEPARTMENT AS WE LL AS THE ASSESSEE ARE BOUND BY THE PRINCIPLES OF CONSISTENCY. THEREFORE, FOLLOWING THE PRINCIPLES OF CONSISTENCY AS LAID 6 ITA NO. 300/JP/2014 A.Y. 2009-10. ITO VS. M/S. KUMAWAT CONTRACTORS. DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF RA DHASWAMI SATSANGH VS. CIT, WE UPHOLD THE ORDER OF LD. CIT (A) AND DISMISS THE APP EAL OF THE REVENUE. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/11/201 5. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 27/11/2015 DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ITO, WARD 3(1), JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- M/S. KUMAWAT CONTRACTORS, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 300/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR