The Income-tax Officer, Amritsar. V. Sh. Sh. Abdul Rehman Najar, ( Contractor), Srinagar

ITA 305/ASR/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63477 (ITAT-AMRITSAR)
• Duration Of Justice: 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 23-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ABRAR HUSSAIN DER
• Keywords: Rejection of books of accounts; Depreciation
• Section: 143(3); 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.305 (ASR)/2012 ASSESSMENT YEAR:2009-2010 PAN :ACCPN7210M INCOME TAX OFFICER, VS. SH. ABDUL REHMAN NAZAR, WARD 3(1), SRINAGAR. SRINAGAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. TARSEM LAL, DR RESPONDENT BY:SH. ABRAR HUSSAIN DER, CA DATE OF HEARING:04/09/2012 DATE OF PRONOUNCEMENT:07/09/2012 ORDER PER BENCH ; THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST T HE IMPUGNED ORDER OF THE CIT(A), JAMMU, DATED 21.05.2012 FOR THE ASS ESSMENT YEAR 2009-10 ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DIRECTING THE AO TO ADOPT NET PROFIT RATE OF 6.5% OF THE TOTAL RECEIPTS INSTEAD OF 10% APPLIED BY THE A.O. W HEN THE BOOKS OF ACCOUNT WERE FOUND INCOMPLETE AND REJECTED U/S 145(3) OF THE INCOME-TAX ACT, 1961. ITA NO.305(ASR)/2012 2 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DIRECTING THE AO TO ADOPT NET PROFIT RATE OF 6.5% OF THE TOTAL RECEIPTS INSTEAD OF 10% APPLIED BY THE A.O. I N VIEW O THE DECISION OF HONBLE ITAT CHANDIGARH A BENCH IN TH E CASE OF M/S. SHIVAM CONSTRUCTION CO. AND AFFIRMED BY THE HO NBLE HIGH COURT OF PUNJAB & HARYANA IN THEIR ORDER IN IT A NO.183 OF 2007 DATED 14.05.2007. 3. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN DIRECTING THE AO TO ADOPT NET PROFIT RATE OF 6.5% OF THE TOTAL RECEIPTS INSTEAD OF 10% APPLIED BY THE A.O. W HEN THE JURISDICTIONAL BENCH OF ITAT AMRITSAR IN THE CASE O F M/S. POOJA CONSTRUCTION CO., REPORTED IN ITA NO.750(ASR) /1992 HAD HELD THAT THE APPLICATION OF NET PROFIT RATE OF 10% ON GROSS RECEIPTS IS PROPER. THE SAID ORDER OF THE JURISDICT IONAL ITAT HAS BEEN CONFIRMED BY THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN THEIR ORDER IN ITA NO.166 OF 1999 DATED 10.09.2010. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE FILED THE RETURN OF INCOME ON 24.04.2009 DECLARING AN INCOME AT RS.9 ,89,198/-. DURING ASSESSMENT PROCEEDINGS, THE AOI NOTICED THAT THE AS SESSEE A CONTRACTOR HAD DECLARED A NET PROFIT RATE OF 3.05% AS COMPARED TO 5.06% IN THE IMMEDIATELY PRECEDING YEAR. THE LD. COUNSEL FOR THE ASSESSEE PR ODUCED LEDGER ACCOUNTS BUT DID NOT PRODUCE COMPLETE DETAILS LIKE MUSTER RO LLS AND CONTRACT WISE PAYMENTS FOR WAGES. THE AO FOUND THAT LEDGER ACCOUN TS WERE NOT IN CONFORMITY WITH PURCHASES, ADDITION TO ASSETS AND W AGES PAID. ACCORDINGLY, HE REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE NET PROFIT RATE OF 10% RELYING ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S. SHIVAM CONSTRUCTION CO ITR NO.166/167/183/1 84 OF 2007. ITA NO.305(ASR)/2012 3 3. ON APPEAL, THE LD. CIT(A) DIRECTED THE A.O. TO APPLY A NET RATE OF 6.5% ON THE RECEIPTS. NOW THE REVENUE IS AGGRIEVED BY THE ORDER OF THE LD. CIT(A) AND IS IN APPEAL BEFORE THIS BENCH. 4. THE LD. DR RELIED UPON THE ORDER PASSED BY THE A SSESSING OFFICER AND STATED THAT THIS BENCH OF THE TRIBUNAL AS WELL AS T HE HONBLE PUNJAB & HARYANA HIGH COURT IN VARIOUS CASES HAS UPHELD TH E NET PROFIT @ 10% IN THE CASE OF THE ASSESSES, WHICH IS SIMILAR TO THE PRESE NT ASSESSEE. HE REQUESTED THAT THE ORDER OF THE AO MAY BE RESTORED BY CANCEL LING THE IMPUGNED ORDER OF THE LD. CIT(A). 5. THE LD. COUNSEL FOR THE ASSESSEE, SH. ABRAR HUSS AIN DER, CA APPEARED ON BEHALF OF THE ASSESSEE AND SUBMITTED T HAT THE ISSUE IN DISPUTE HAS ALREADY BEEN ADJUDICATED AND DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS BENCH OF TRIBUNAL IN THE CASE OF M/S. CONSTRUCTION ENGINEERS, SRINAGAR, IN ITA NO.266(ASR)/2010, DATED 24 TH DEC., 2010 AS WELL AS BY THE DECISION OF THE HONBLE PUNJAB & HAR YANA HIGH COURT. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT RECORD AVAILABLE WITH US ESPECIALLY THE ORDERS PASSED BY T HE REVENUE AUTHORITIES. WE ARE OF THE CONSIDERED OPINION THAT THE LD. FIRST APPELLATE AUTHORITY HAS DECIDED THE ISSUE IN DISPUTE BY RESPECTFULLY FOLLOW ING THE ORDER OF THIS BENCH ITA NO.305(ASR)/2012 4 IN THE CASE OF M/S. CONSTRUCTION ENGINEERS, SRINAGA R (SUPRA) AS WELL AS THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT . FOR THE SAKE OF CONVENIENCE, RELEVANT PART OF THE FINDINGS OF THE L D. CIT(A) GIVEN IN PARA 5 TO 5.3 ARE REPRODUCED AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE REASONING ADVAN CED BY THE AO FOR ADOPTING THE NET PROFIT RATE OF 10% AS WELL AS THE WRITTEN SUBMISSIONS FILED ON BEHALF OF THE ASSESSEE. 5.1. GROUND NO.1 CHALLEGES THE ASSESSMENT MADE AT R S.32,38,300/- AND GROUND NO.2 IS REGARDING THE NOT CONFRONTING TH E ASSESSEE AND NON ISSUANCE OF ANY SHOW CAUSE NOTICE, I FIND FROM THE ASSESSMENT ORDER THAT THE DEFICIENCIES POINTED OUT BY THE A.O. WERE DULY BROUGHT TO THE NOTICE OF THE ASSESSEE BUT EXCEPT FOR A PLEA MADE FOR LOWER NET PROFIT THAN ASSESSMENT YEAR 2007-08 THAT THE TURNOV ER HAD INCREASED IN THE CURRENT ASSESSMENT YEAR, NO CONCRETE REPLY W AS ADVANCED. THERE WAS NO COGENT EXPLANATION OFFERED BY THE ASSE SSEE APPELLANT FOR DEFICIENCIES AS POINTED OUT. THE ASSESSMENT IS MADE U/S 143(3) OF THE ACT AND THE ASSESSEE WAS DULY CONFRONTED DURING THE PROCESS OF ASSESSMENT, AS EVIDENT FROM THE ASSESSMENT ORDER, H ENCE NO SEPARATE SHOW CAUSE NOTICE WAS REQUIRED TO BE GIVEN AS THE N ET PROFIT WHICH WAS AT 5.37% IN ASSESSMENT YEAR 2007-08 WAS AT 1.98 % IN ASSESSMENT YEAR 2008-09 AND 3.05% IN THE PRESENT ASSESSMENT YE AR. THE FALL IN NET PROFIT IS NOT MARGINAL BUT DRASTIC FOR WHICH T HE SOLE REASON ADVANCED IS NOT SUFFICIENT. THE RISE IN TURNOVER MA Y JUSTIFY A FALL IN G.P. BUT IT SHOULD BE COMMENSURATE TO EACH OTHER . IN VIEW OF THE REASONS DISCUSSED ABOVE, I HOLD THAT THE AO WAS JUS TIFIED IN INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT AN D HIS ACTION TO THIS EXTENT IS CONFIRMED. 5.2. NOW COMING TO THE APPLICATION OF NET PROFIT RA TE IT IS SEEN THAT THE RELIANCE OF THE A.O. ON THE CASE OF M/S. SHIVAM CONSTRUCTION (SUPRA) IS NOT FULLY APPLICATION TO THIS CASE. IN T HE CASE OF M/S. SHIVAM CONSTRUCTION NO BOOKS OF ACCOUNTS WERE PRODUCED BY THE ASSESSEE BEFORE THE A.O. AND APPLICATION OF NET PROFIT RATE OF 10% SUBJECT TO ALLOWANCE OF SALARY, INTEREST AND DEPRECIATION ATTA INED FINALITY IN AN EARLIER ASSESSMENT YEAR. EVEN THE RELIANCE OF ASSES SEE ON THE CASE OF ITA NO.305(ASR)/2012 5 SH. AJAY GOEL 99-TTJ-(JODHHPUR) WHEREIN IT WAS HELD THAT THE PAST HISTORY OF ASSESSEE OR COMPARABLE CASES ARE THE BES T GUIDES FOR ESTIMATION OF NET PROFIT IS ALSO NOT FULLY APPLICAB LE TO THE FACTS OF THIS CASE AS IN THE CASE OF ASSESSEE THE NET PROFITS SHO WN ARE NOT CONSISTENT BUT IN THREE ASSESSMENT YEAR INCLUDING PRESENT ONE FLUCTUATES BETWEEN 1.98% TO 5.06% THE ONLY COMPARABLE CASES WHICH WOUL D APPLY ARE THE CASES OF SIMILAR OTHER ASSESSES IN SIMILAR WORK ING LOCATIONS THE ASSESSEE IS OPERATING IN KASHMIR . IN THE CASE OF M /S. CONSTRUCTION ENGINEERS, SRINAGAR, THE JURISDICTIONAL HONBLE ITA T, AMRITSAR IN ITA NO.266(ASR)/2010 HAD DIRECTED TO APPLY A NET PROFIT RATE OF 6.5% SUBJECT TO NO OTHER ALLOWANCES. THOUGH IN THAT CASE THE ASSESSMENT WAS MADE UNDER SECTION 144 OF THE ACT YET CONSIDER ING THE NET PROFIT SHOWN BY THIS ASSESSEE AND THE UNEXPLAINED DISCREPA NCIES, I FIND THAT IT WOULD BE APT TO FOLLOWED THE JURISDICTIONAL HON BLE ITAT, AMRITSAR AND A NET PROFIT RATE OF 6.5% IS TO BE APPLIED WIT HOUT ANY FURTHER ALLOWANCE LIKE DEPRECIATION AS CLAIMED IN THE WRITT EN SUBMISSIONS. 5.3. THE A.O. HAS SEPARATELY CONSIDERED THE CONTEN TION OF ASSESSEE AND FIN THAT ASSESSEE IS NOT TO SUCCEED. NO SUCH GR OUND OF APPEAL IS TAKEN. ALSO ON MERITS THE DECISION OF THE HONBLE H IGH COURT OF PUNJAB & HARYANA IN CASE OF M/S. AGGARWAL ENGG.CO. 302 ITR 246 AND THE DECISION OF HONBLE ITAT, AMRITSAR, IN THE CASE OF M/S. RESHI CONSTRUCTION CO. IN ITA NO.426/478/2008, WHEN THE N ET PROFIT RATE IS ADOPTED NO OTHER ADDITION COULD BE MADE. 6.1. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE ORDER PASSED BY THIS BENCH IN THE CASE OF CONST RUCTIONS ENGINEERS, SRINAGAR (SUPRA) AS WELL AS THE DECISION OF THE HON BLE PUNJAB & HARYANA HIGH COURT, MENTIONED ABOVE, WE ARE OF THE CONSIDER ED OPINION THAT THE LD. FIRST APPELLATE AUTHORITY HAS PASSED A WELL REASONE D ORDER ON THE BASIS OF MATERIAL AND EVIDENCE PLACED ON RECORD AND HAS RIGH TLY DELETED THE ADDITION ITA NO.305(ASR)/2012 6 IN DISPUTE. ACCORDINGLY, WE UPHOLD THE IMPUGNED ORD ER BY DISMISSING THE APPEAL FILED BY THE DEPARTMENT. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7TH SEPTEMBER, 2012. SD/- SD/- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 7 TH SEPTEMBER, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:ABDUL REHMAN NAJAR, SRINAGAR. 2. THE ITO WARD 3(1), 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.