Shri Sanjay Jain, Muzaffarnagar V. DCIT, Uttar Pradesh

ITA 3133/DEL/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6743 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 18-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Opportunity of being heard; Principle of natural justice
• Section: 44AD; 143(3); 234B; 143(2); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.3133/DEL/2017 ASSESSMENT YEAR: 2013-14 SHRI SANJAY JAIN, C/O- DINESH MOHAN, ADVOCATE, 2-ANAND VIHAR, LANE NO. 1, CIRCULAR ROAD, MUZAFFARNAGAR. VS. DCIT, CIRCLE SAHARANPUR, UTTAR PRADESH PAN :ACKPJ3369F (APPELLANT) (RESPONDENT) ORDER PERO.P. KANT, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST OR DER DATED 15/02/2017 PASSED BY THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-MUZAFFARNAGAR [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 2013-14 RAISING FOLLOWING GROUNDS: 1. THAT ASSESSMENT ORDER PASSED U/S 143(3) AND ADD ITION MADE BY THE ASSESSING OFFICER ARE ILLEGAL, BAD IN LAW AND WITHO UT JURISDICTION. THE CIT(A) ERRED IN UPHELD THE SAME. 2. THE ADDITION/DISALLOWANCES MADE BY THE ASSESSIN G OFFICER ARE ILLEGAL, UNJUST, HIGHLY EXCESSIVE AND ARE NOT BASED ON ANY MATERIAL ON RECORD BY THE ASSESSING OFFICER. THE TOTAL INCOM E OF THE APPELLANT HAS BEEN WRONGLY AND ILLEGALLY COMPUTED BY THE ASSE SSING OFFICER AT APPELLANT BY NONE RESPONDENT BY SH. S.S. RANA, CIT(DR) DATE OF HEARING 17.10.2019 DATE OF PRONOUNCEMENT 30.10.2019 2 ITA NO.3133/DEL/2017 RS,90,59,170.00 AS AGAINST DECLARED INCOME OF RS.37 ,89,190.00. THE CTT(A) ERRED IN UPHELD THE SAME. 3. THAT, IN VIEW OF THE FACTS AND CIRCUMSTANCES, T HE CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHELD THE ACTION OF REJECTION OF BOOKS OF ACCOUNTS U/S 145 OF BY THE ASSESSING OFFICER WITHOU T POINTING OUT ANY SINGLE DISCREPANCY IN THE BOOKS OF ACCOUNTS MAI NTAINED BY THE ASSESSEE, WHICH IS HIGHLY ARBITRARY, UNJUST AND AGA INST THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THAT, THE ASSESSING OFFICER/CYT(A) ERRED IN REJ ECTING THE BOOKS OF ACCOUNT U/S 145(3) WITHOUT POINTING OUT THAT HOW IT IS IMPOSSIBLE TO DEDUCE THE CORRECT INCOME FROM THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE APPELLANT, WHICH IS HIGHLY ARBITRARY, UNJUST, AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE BOOKS. 5. THAT, IN VIEW OF THE FACTS AND CIRCUMSTANCES, T HE CIT(A) ERRED IN ESTIMATING THE GROSS PROFIT AT 5% OF THE TOTALLY TU RNOVER AND MADE THE ADDITION OF RS.91,37,680/-, WHICH IS HIGHLY ARBITRA RY, UNJUST, EXCESSIVE AND AGAINST THE FACTS AND CIRCUMSTANCES O F THE CASE. 6. THAT, THE C 11(A) FAILED TO APPRECIATE THAT THE RE IS NO BASIS OF ESTIMATION OF GROSS PROFIT @5%, WHICH IS HIGHLY ARB ITRARY, EXCESSIVE, UNJUST AND AGAINST THE FACTS & CIRCUMSTANCES OF THE CASE. 7. THAT THE ASSESSING OFFICER/CIT(A), IN VIEW OF T HE FACTS AND CIRCUMSTANCES OF THE CASE ERRED ON FACTS AND IN LAW IN MAKING THE AD-HOC ADDITION/ DISALLOWANCE ON ESTIMATED BASIS, W HICH IS UNJUST, ARBITRARY, UNLAWFUL, HIGHLY EXCESSIVE, BASED ON SUR MISES AND CONJECTURES AND CANNOT BE JUSTIFIED BY ANY MATERIAL ON RECORD. 8. THE ADDITIONS CONFIRMED AND THE OBSERVATIONS MA DE BY CIT (A) ARE UNJUST, UNLAWFUL AND BASED ON MERE SURMISES AND CON JUNCTURES. THE ADDITIONS MADE CANNOT BE JUSTIFIED BY ANY MATERIAL ON RECORD. 9. THAT THE EXPLANATION GIVEN EVIDENCE PRODUCED, M ATERIAL PLACED AND AVAILABLE ON RECORD HAS NOT BEEN PROPERLY CONSIDERE D AND JUDICIALLY INTERPRETED AND THE SAME DO NOT JUSTIFY THE ADDITIO NS/ ALLOWANCES MADE. 10. THAT THE IMPUGNED ASSESSMENT ORDER PASSED BY TH E ASSESSING OFFICER AND ORDER PASSED BY CIT(A) ARE AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND THE SAME HAS BEEN PASSED WITHOU T AFFORDING REASONABLE AND ADEQUATE OPPORTUNITY OF BEING HEARD. 11. THAT THE INTEREST U/S 234A & 234B HAS BEEN WRON GLY AND ILLEGALLY CHARGED AS THE APPELLANT COULD NOT HAVE FORESEEN TH E DISALLOWANCES/ADDITIONS MADE AND COULD NOT HAVE INC LUDED THE SAME IN CURRENT INCOME FOR PAYMENT OF ADVANCE TAX. THE INTEREST CHARGED UNDER VARIOUS SECTIONS IS ALSO WRONGLY WORK ED OUT. 12. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER AND OR MODIFY THE GROUNDS OF APPEAL OF THE SAID APPEAL 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE IS AN INDIVIDUAL AND WAS ENGAGED IN CARRYING OUT LABOUR C ONTRACT WORK 3 ITA NO.3133/DEL/2017 AND SUPPLY OF BUILDING MATERIAL. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED RETURN OF INCOME ON 02/12/2013, DECLARING TOTAL INCOME OF 37,89,190/-. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) WAS ISSUE D AND COMPLIED WITH. DURING ASSESSMENT PROCEEDING, THE ASSESSING O FFICER VERIFIED, BOOKS OF ACCOUNTS AND VOUCHERS ON THE TES T CHECK BASIS AND OBSERVED AS UNDER: - ONLY PART OF THE BOOKS OF ACCOUNTS WERE PRODUCED BE FORE THE ASSESSING OFFICER; - NO LOGBOOK WAS FOUND TO BE MAINTAINED FOR RUNNING EXPENSES OF CAR(S) AND PERSONAL TELEPHONE CALLS; - AGAINST LABOUR RECEIPT OF 18,18,99,381/-, EXPENSES OF 17,46,42,737/- ON LABOUR AND EARTH WORK ARE CLAIMED , WHICH SEEMS TO BE ON THE HIGHER SIDE; - VOUCHERS OF LABOUR PAYMENT OF 11,90,000/- WERE ONLY PRODUCED OUT OF LABOUR EXPENSES OF RS.17,46,42,737/ -; - THE VOUCHERS PRODUCED WERE HANDMADE VOUCHERS WITHOU T HAVING DETAILS OF NAME AND ADDRESS OF THE RECIPIENT PERSON, ALONG WITH NATURE OF WORK DONE; 3. IN VIEW OF THE DEFECTS NOTICED IN THE BOOKS OF ACC OUNTS, THE LD. ASSESSING OFFICER REJECTED BOOKS OF ACCOUNTS IN VOKING PROVISIONS OF SECTION 145(3) OF THE ACT AND APPLIED NET PROFIT RATE OF 5% ON THE RECEIPTS OF 18,18,99,381/- AND SALES SHOWN OF 8,54,224/- AND WORKED OUT NET PROFIT AT 91,37,680/- AS AGAINST THE INCOME OF 37,89,197/- DECLARED BY THE ASSESSEE. HE ASSESSED THE INCOME ACCORDINGLY. AGGRIEVED, THE ASS ESSEE FILED 4 ITA NO.3133/DEL/2017 APPEAL BEFORE THE LEARNED CIT(A), WHO UPHELD THE AD DITION MADE BY THE LD. ASSESSING OFFICER. 4. BEFORE US, NEITHER ANYONE REPRESENTED ON BEHALF OF THE ASSESSEE, NOR ANY ADJOURNMENT WAS FILED, DESPITE THA T ON THE LAST DATE OF THE HEARING, I.E., ON 19/09/19, LD. COUNSEL OF THE ASSESSEE WAS PRESENT IN THE HEARING AND MATTER WAS ADJOURNED TO 17/10/2019. BOTH THE PARTIES WERE COMMUNICATED THE HEARING DATE 17/10/2019. IN VIEW OF NO COMPLIANCE, WE WERE OF THE VIEW THAT ASSESSEE IS NOT INTERESTED IN PROSECUTING THE APPEAL. ACCORDINGLY, THE APPEAL WAS HEARD EX PARTE QUA THE ASSESSEE, AFTER HEARING ARGUMENTS OF THE LD. DR . 5. WE FIND THAT THE LD. CIT(A) SUSTAINED THE DISALLOW ANCE OBSERVING AS UNDER: ON CONSIDERATION OF THE FACTS OF THE CASE IT IS NO TED THAT THE APPELLANT HAS SHOWN CONTRACTUAL RECEIPTS OF RS.18,1 8,99,381/- ON ACCOUNT OF LABOUR/EARTH SUPPLY AND AGAINST WHICH IT HAS CLAIMED LABOUR CHARGES/EARTH WORK EXPENSES FOR RS.17,46,42, 737/-. THE APPELLANT HAS SHOWN NET PROFIT @ 2,13%. U IS NOTED FRONT THE RECORD THAT HE HAS FAILED SO SUBSTANTIATE THE CLAIM OF THE ABOVE EXPENSES BY PRODUCING DOCUMENTARY EVIDENCE IN SUPPORT OF THE SAME. FROM THE FACTS OF THE CASE, IT IS NOTED THAT THE APPELLA NT HAS NOT ACCOUNTS AND, THEREFORE, THE A.O. JUSTIFIED M INVOKE PROVISI ON OF SEC 145(3) OF THE INCOME TAX ACT BY REJECTING THE HOOKS OF ACCOUN TS MAINTAINED BY THE APPELLANT AS THE SAME HAVE BEEN FOUND NOT TO BE COMPLETE. THE BOOKS OF ACCOUNTS ARE NOT ONLY CASH BOOK, LEDGER ET C. BUT ARE TO BE SUPPORTED BY RELEVANT PRIMARY EVIDENCES IN SUPPORT OF TIRE EXPENSES CLAIMED SUCH AS VOUCHERS, MUSTER ROLLS, BILLS FOR P URCHASE OF MATERIALS ETC SO THAT THE GENUINENESS OF FACTS AND FIGURES CAN BE EXAMINED AND VERIFIED. THESE PRIMARY EVIDENCES ARC THE ORIGINAL BASIS TO RECORD THE TRANSACTIONS IN THE LEDGER/CASH BOOK. IN THE ABSENCE OF DIE SAME, BOOKS OF ACCOUNT CANNOT BE SAI D TO BE COMPLETE THEREFORE, IN THIS CASE THE AO WAS NOT RIGHTLY SATI SFIED ABOUT CORRECTNESS/ COMPLETENESS OF BOOKS M ACCOUNT OF APP ELLANT TO INVOKE- PROVISION OF SECTION 145(3) OF THE ACT. THE SUBMISSION OF THE APPELLANT THAT RESULTS ARE COMPARABLE HAS BEEN CONS IDERED, HOWEVER, FOR INCOME-TAX PROCEEDINGS EVERY YEAR IS A DIFFERENT YEAR. IT IS- RELEVANT TO MENTION HERE THAT ALL THE EXPENS ES FOR RS. 17.46 CRORE HAVE BEAT MARK IN CASH WITH INCOMPLETE IDENTI TIES TO WHOM 5 ITA NO.3133/DEL/2017 SUCH PAYMENTS HAVE BEEN MADE. THEREFORE, THESE EXPE NSES ARE BEYOND VERIFICATION. FURTHER FROM THE FACTS IT IS S EEN THAT THE A.O. HAS APPLIED NET PROFIT OF 5% ON THE TOTAL CONTRACTU AL RECEIPTS OF RS.18.18 CRORES WHICH HAS BEEN FOUND TO BE REASONAB LE. KEEPING IN VIEW THE FACTS OF THE CASE, THE A.O. HAS BEEN REASO NABLE TO MAKE SUCH ESTIMATION BY APPLYING ESTIMATION OF NET PROFI T @ 5% OF THE TOTAL RECEIPTS WHICH DOES NOT REQUIRE ANY FURTHER INTERFE RENCE. ACCORDINGLY, INCOME COMPUTED FROM BUSINESS BY THE AO IS UPHELD. GROUNDS OF APPEAL NOS. 1 TO 6 ARE DISMISSED. 6. IN OUR OPINION, LOOKING TO THE DEFECTS IN MAINTENAN CE OF THE BOOKS OF ACCOUNTS AND VOUCHERS BY THE ASSESSEE, THE LOWER AUTHORITIES ARE JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS AND ESTIMATING THE NET PROFIT @ 5% OF THE TOTAL RECEIPT , WHICH IS MOST REASONABLE AS COMPARED TO NET PROFIT RATE OF 8% PRE SCRIBED UNDER SECTION 44AD OF THE ACT ON PRESUMPTION BASIS. THE G ROUNDS OF THE APPEAL OF THE ASSESSEE ARE ACCORDINGLY DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER, 2019. SD/- SD/- (H.S. SIDHU) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30 TH OCTOBER, 2019. RK/-(D.T.D.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI