Shivam Builders Private Limited, Ahmedabad V. The Deputy Commissioner of Income Tax, Circle-4(1)(1), Ahmedabad

ITA 317/AHD/2022

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2479 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-04-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 17-08-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Question of law; Cost of acquisition
• Section: 145; 142(1); 143(2); 113; 73; 13; 145(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA RAGHUNATH KAMBLE, JUDICAL MEMBER & SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 317/Ahd/2022 (िनधाᭅरण वषᭅ िनधाᭅरण वषᭅ िनधाᭅरण वषᭅ िनधाᭅरण वषᭅ / Assess ment Years : 2015-16) Sh iv a m B ui ld er s P riv at e Li mit ed 80 2, 8 t h Fl oor , Ra jv i Arc ad e, N r. G uru ku l D ri ve in Ro ad , Me mn ag ar , Ah me da bad , Gu ja ra t 38 00 52 बनाम बनामबनाम बनाम/ V s . De pu ty C o mmi ss i on er of In co me T ax Cir cl e 4( 1)( 1) , Ah me dab ad ᭭थायी लेखा सं./जीआइआर सं./P A N / G IR N o . : A A C C S 0 2 9 6 D (Appellant) . . (Respondent) अपीलाथᱮ ओर से /Appellant by : Shri Hem Chhajed, A.R. ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri J L Bhatia, Sr. DR D a t e o f H e a r i n g 18/04/2024 D a t e o f P r o n o u n c e m e n t 09/05/2024 O R D E R PER SHRI NARENDRA PRASAD SINHA, AM: This appeal is filed by the assessee against the order of the National Faceless Appeal Centre ( NFAC), Delhi, (i n short ‘the CIT( A) ’) dated 27.07.2022 for the Assessment Year 2015-16. 2. The assessee has raised the following grounds in this appeal: “1. The order passed by the Ld. CIT(A) is against law, equity & justice. ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 2 – 2.) The Ld. CIT(A) has erred in law and/or facts in upholding the rejection of books of accounts made by the Ld. AO. 3. The Ld. CIT(A) has erred in law and/or facts in upholding that notices issued by Ld. AO is valid and is not in contravention to the instruction No. 01/2011 of CBDT. 4. The Ld. CIT(A) has erred in law and/or facts in upholding the addition of Rs.54,02,545/- made by the Ld. A.O. being estimated net profit @ 10% of total receipts. 5. The appellant craves liberty to add, amend, alter or modify all or any grounds of appeal before final appeal.” Brief facts of the case 3. The brief fa cts of the case are that t he assessee had e-filed its return of income for A.Y. 2015-16 on 26.09.2015 declaring loss of Rs.3,29,55,888/-. The case was selected for co mplete scrutiny under C ASS and a ccordingly notice u/s. 143(2) of the Inco me Tax Act, 1961 (hereinafter refe rred as ‘the Act ’) was issued by the DCI T. The AO noticed that in the curre nt year the assessee had shown loss of Rs.3,29,55,888/- on total turnover of Rs.5,40,25,457/- whereas in the pre ceding ye ar the assessee had declared net pro fit of Rs.26,21,429/- on total turnover of Rs.1,47,09,632/-. Thus, the assessee had shown negative NP of minus 61% during the year as co mp ar ed to positive NP of 17.82% in the preceding year . The assesse e is a builder involved in development of va rious projects. In the course of assess ment, the AO had called for various details fro m the assessee which was only partl y co mp lied. As the assessee did not furnish the co mplete details as required by the AO, he re jected the books of accounts u/s.145(3) of the Act and esti mated income of the assessee @ 10% at Rs.54,02,545/-, which was upheld b y the ld. CIT( A). ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 3 – Sub mission of the assessee 4. Shri He m Chha je d, ld. AR appea ring for the asse ssee submitted at the outset that the notice issued b y the AO was in contravention to the Instruction No. 01/2011 of CBDT and was , therefore, not valid. He explained that as per the said I nstruction, the jurisdiction over corporate returns with income of above Rs.30 Lakhs in the Metro Cities was with the DCI T/AC IT and the jurisdiction of the case with inco me upto Rs.30 Lakhs was with ITOs . As the assessee had not disclosed income ab ove Rs.30 Lakhs in the current year, the jurisdiction was not with the DCI T and, therefore, th e issue of notice u/s.143(2) of the Act b y the DCI T was incorre ct. In this regard, he has relied upon following decisions: i. UCO Bank vs. CI T, [1999] 104 Tax man 547 (SC ) ii. Keshavji Rav ji & Co. vs. C IT, 183 I TR 1 (SC) iii. DCI T & Anr . vs. Proficient Commo dities Pvt. Ltd. & Anr., [2020] 58 CCH 0291 (Kol. Trib.) iv. Royal Western In dia Turf Club Ltd. vs. ACI T, [2019] 73 ITR 0670 (Mu m. Trib.) 5. On merits, the ld . AR sub mitted t hat the docu ments as required by the AO were sub mitt ed by the assessee but the evidences brought on record were brushed aside by the AO. He contended that the AO had passed the order on sur mises and conjunctures with a pre-deter mined mind and without pointing out any defect i n the books of accounts and the method of accounting adopted b y the assessee. He further submitted that ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 4 – the AO had not given any basis for estimating the net profit @ 10% of total receipts. He further s ubmitted that if the addition as made b y the AO is ac cepted then the gross profit would be 78.6%, which wa s absurd and not possible in the construction industry. It was pointed out by the ld. AR that as a result of addition as made by the AO, the closing stock of current year will increase and accor dingly, the opening stock of next yea r will also increase b y the e quivalent a mount and, therefore, this addition will have no tax i mpact in the long r un. He further submitted that the CIT(A) had me chanically confirmed the addition made b y the AO without applying his mind to the facts of the case . The ld. AR has relied upon the following decision in respect of wrong rejection of books of accounts: 1. Gujarat High court in the case of CIT vs Vikram Plastics [1999] 239 ITR 161 (GUJ.) 2. ITAT Ahmedabad in the case of Pankaj Diamond vs. Assistant Commissioner of Income-tax [2010] 5 ITRCTRIB.) 469 (Ahmedabad) 3. ITAT Ahmedabad in the case of Nice Industries vs ITO,Wd- 5(3),Surat,[2010] 7 taxmann.com 89 (Ahmedabad) 4. ITAT Ahmedabad in the case of Deputy Commissioner of Income-tax, Ahmedabad vs. Asian Grantio India Ltd [2020] 113 taxmann.com 445 (Ahmedabad - Trib.) 5. Ahmedabad ITAT in the case of Inspecting Assistant Commissioner Vs. Dinesh Tiles Factory [1988] 37 TAXMAN 357 (AMD.) (MAG.) 6. ITAT Mumbai in the case of Kamani Oil Industries Pvt. Ltd. Vs DCIT I.T.A. No. 5465/Mum/2017 7. ITAT Rajkot in the case of Panchshil Exim Pvt. Ltd. vs. Deputy Commissioner of Income Tax (2020) 58 CCH 0326 Rajkot Trib” ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 5 – 6. Further, the Ld. AR has relied upon the following decisions in respect of wron g esti mation of inco me: “1. Hon'ble Supreme court in the case of Brij Bhushan Lal Parduman Kumar vs. Commissioner of Income-tax [1978] 115 ITR 524 (SC) 2. Hon'ble Supreme court in the case of Dhakeswari Cotton Mills Ltd. vs. Commissioner of Income Tax (1955) 27 ITR 0126 3. Hon'ble Gujarat High Court Principal Commissioner of Income Tax vs. Swastik Construction [2018] 91 taxmann.com 10 (Gujarat)” Sub mission of the Revenu e 7. Shri J. L. Bhatia, t he ld. Sr . DR, on the other hand, strongly supported the order of the AO as well as the C IT( A). On the issue of jurisdiction, ld. Sr . DR sub mitted that it is a settled principle that ‘inco me ’ includes ‘loss’ and this concept has been approved by the Hon ’ble Su pre me Court in a n u mber of cases. As the ‘loss’ disclosed by the a ssessee during the year was in excess of Rs.30 Lakh the notice was rightly issued by the DCIT as the I TO had jurisdiction only over the case with inco me, which includes loss, upto the a mount of Rs.30 Lakh only. He sub mitted that the notice issued by the DCI T was corr ect and was in accordance with the Board’s Instructions. 8. On merits, ld. Sr . DR explained that the assessee ha d not explained the reason for huge loss in the current year when it was consistently showing profit in the earlier ye ars. Fu rther, the details as required b y the AO were not furnished and the genuineness of the loss as claimed was not established. The assessee had not furnished all the details as called for by the AO ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 6 – in the course of a ssessment proceeding. The non-furnishing of the vital details had a direct bea ring on the corr ectness of accounts of the assesse and the AO h ad rightly re jected the books of accounts after giving a cogent reason. The det ails as not produced before the AO were also not produced before the CIT( A) in the c ourse of appeal proceeding. Therefore, the rejections of books of accounts as made b y the AO was correct which was rightly confir med b y the CIT( A). He furthe r sub mitted that the estimation of inco me as mad e b y the AO was made a fter considering the profit as disclosed by the assessee itself in the past yea rs. The ld. Sr . DR also relied upon the decision of ITAT Cochin Bench in the case of ACI T vs. Skyline Builders [2010] 194 Taxman 61 (Cochin) (MAG). Findings and O rd er 9. We have given a thoughtful consideration to the rival submissions and have perused the materials brought on record. We do not find any merit in the objection of the assessee to the jurisdiction issue. The assesse has relied upon certain judicial pronounce ments in this regard. The issue involved in the case of UCO Bank vs. CI T (supra) was whether CBDT Circular dated 9-10- 1984 was in conflict with provisions of section 145 of the Act and the decision of the Supreme Court in the case of Keshavji Ravji & Co. (supra) was on the binding nature of CBDT Circular & Instructions. The other decisions are also not found on the exact issue as involved in this case. As per Instruction No. 01/2011 of CBDT, the jurisdiction over corporate assessee with income of Rs.30 Lakhs and above in ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 7 – metro cities was with the DCI T/ACIT. In the curre nt year, the assessee had disclosed loss of Rs.3,29,55,888/-. The de finition of income in Section 2(24) of the Act is an inclusive definition and it is a settled principle that under the provision of In co me Tax Act, inco me includes loss. The Hon ’ble Supre me Cou rt had held in the case of C IT v. Harprasad & C o. P. Ltd. (1975) 99 ITR 118 (SC) that the wor ds ‘inco me ’ or ‘p rofits and gains’, should be understood as including losses also. To reproduce fro m the order: From the charging provisions of the Act, it is discernible that the words "income" or "profits and gains" should be understood as including losses also, so that, in one sense "profits and gains" represent "plus income" whereas losses represent "minus income" CIT v. Karamchand Prem Chand Ltd. [1960] 40 ITR 106 ; [1960] 3 SCR 72. In other words, loss is negative profit. Both positive and negative profits are of a revenue character. Both must enter into computation, wherever it becomes material, in the same mode of the taxable income of the assessee. 10. In the subsequent decision of CIT vs. Gold Coin Health Food Pvt. Ltd. (2008) 304 ITR 308 (SC), it was r eiterated by the Apex Court that in view of the decision of CIT v. Ha rprasad & Co. P . Ltd. (supra ), there was irresistible conclusion that inco me also includes losses. As the inco me as defined under the Inco me Tax Act includes losses, the C BDT Instruction regarding jurisdiction of corporate assessee in metro cities being with ACI T/DCI T was i n respect of both the cases of inco me as well as losses over Rs.30 Lakhs. Therefore , the notice u/s. 14 3(2) of the Act was correctly issued b y the DCI T in this cas e. As the objection of the assessee on the issue of jurisdiction is devoid of merit, the ground No.3 as taken b y t he assessee is dismissed. ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 8 – 11. Ground Nos. 2 & 4 pertain to reje ction of books of account and estimation of profit @10% of total receipts. The assessee is engaged in the business of construction and development projects. It is found that the case was selected for scr utiny for the reason that the assesse has disclosed huge loss with negative NP of 61% as agai nst income and NP of 17.82% in the preceding year . In the course of assess ment, t he AO had called for various details in respect of WIP/closing stock, purchase with supporting bills, transportation bills with delivery challans, part y- wise ledge account etc. and the copy of the notice u/s. 142(1) of the Act along with the q uestionnaire is re produced in the assessment order. The assessee had co mplied with the said notice and furnished only pa rt of the details. As per the finding given b y the AO, the following details were not provided in the course of assessment: “ (i ) T h e a s s e s s e e f a i l e d t o f u r n i s h t h e p r o j e c t - w i se d e t a i l s i n c l u d i n g t h e c o p y o f b r o c h u r e , l a y o u t / p l a n , p e r m is s i o n f r o m l o c a l a u t h o r i t y t i l l B U , G - m a p l o c a t i o n a n d n a m e s of s u c h p r o j e c t b y w h i c h t h e y a r e m a r k e t e d . ( i i ) T h e a s s e s s e e h a d n o t f u r n i s h e d t h e c o p y o f l o an a p p l i c a t i o n a n d c o p y o f p r o j e c t r e p o r t a n d s a n c t i o n l e t t e r f o r s e c u r e d l o a n f r o m b a n k a n d o t h e r p a r t i e s . ( i i i ) T h e d e t a i l s o f u s a g e m o t o r s i n s p e c i f i e d f o r ma t i s n o t s u b m i t t e d . ( i v ) N o c o n f i r m a t i o n i n r e s p e c t o f a d v a n c e r e c e i v e d f r o m t h e b u y e r s w e r e s u b m i t t e d . ( v ) N o d e t a i l s r e g a r d i n g r e a s o n s o f a d v a n c e g i v e n to r e l a t e d p a r t i e s i s f u r n i s h e d . ( v i ) N o d e t a i l s o f p r o j e c t w i s e WI P c a l l e d i n s p e c if i e d f o r m a t w a s s u b m i t t e d . F u r t h e r , n o d e t a i l s r e g a r d i n g c o s t o f l an d o r J V a g r e e m e n t w a s s u b m i t t e d . ( v i i ) N o d o c u m e n t a r y e v i d e n c e f o r p u r c h a s e s m a d e a s c a l l e d f o r w a s p r o v i d e d . N o p r o o f l i k e c o p y o f b i l l s / t r a n s p or t a t i o n b i l l a n d d e l i v e r y c h a l l a n o f p u r c h a s e s a n d s e r v i c e s h a s b e e n s u b m i t t e d b y t h e a s s e s s e . ” ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 9 – 12. The assessee has c ontended that all the details that wer e not furnished had no impact on the prof itability of the assessee and that it had furnished the trial balan ce which was exa mined and analysed in the assessment order. I t is true that all the details and documents as not produced by t he AO ma y not have i mpact on the profit but nevertheless the y have a beari ng on the correctness of the accounts. The as sessee had not explained as to wh y these docu ments were not pr oduced before the AO or even before the C IT( A). The assessee has not co me for ward and produced these evidences before us in the course of present appeal as well and neither the reason for non-production of these details of the accounts has been explained. 13. In the assess ment order, the AO h ad anal ysed the t rial balance furnished b y the assessee and found that accounts pertained to three different projects undertaken by the assessee. The anal ysis chart of the AO appear ing in the assessment order is found to be as under: Rajvi Garnet Rajvi Pearl Rajvi Oasis Sale 45710000/- 5262000 0 Closing WIP 9,60,87,5007- 17533057 16,98,3387- Total 141808317 22795057 16,98,3387- Direct expense 153101870 22795057 0 Indirect expenses 20188467 0 16,98,338 Total 173290337 22795057 16,98,338 ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 10 – N.P. - 31482020/- 0 0 14. It is apparent from the above table that the entire loss was in respect of the project Ra jvi Gar net and the net profit of the other two project was Nil. On the basis of above analysis and for the failure to pr oduce the details as c alled for, the AO had rejected the books of accounts and the reason for re jection as appearing in the assessment order is found to be as under: “ A n a l y s i s : I t i s c l e a r f r o m t h e a b o v e t a b l e t h a t a ss e s s e e h a s e i t h e r b o o k e d s a l e s a t v a l u e l o w e r t h a n i n c o s t p r i c e o r ha s s h o w n WI P a t m u c h l o w e r a m o u n t t h a n w h a t i t s h o u l d h a v e b e e n . Fu r t h e r , d i r e c t a n d i n d i r e c t e x p e n s e s a r e m u c h h i g h e r t h a n s a l e s a nd c l o s i n g WI P f o r e n t i r e p r o j e c t w h i c h a l s o i n d i c a t e o v e r i n v o i c in g o f e x p e n s e s . I n t h e a b o v e b a c k g r o u n d a n d a s s e s s e e ’ s i n t e n t i o n a l a v o i d a n c e t o p r o v i d e a n y d a t a t o v e r i f y g e n u i n e n e s s , r e a s o n a b l e ne s s a n d b u s i n e s s n e x u s f o r s u c h h u g e e x p e n s e s c o m p e l s t h e u n d e r s i g n ed t o q u e s t i o n r e l i a b i l i t y o f h i s / h e r b o o k s o f a c c o u n t s . 3 . 1 . 6 I n v i e w o f t h e a b o v e i r r e g u l a r i t i e s f o u n d i n t h e b o o k s o f t h e a s s e s s e e a n d s i n c e , t h e a s s e s s e e f a i l e d t o f u r n i s h t h e r e q u i s i t e d e t a i l s o f WI P a n d s u p p o r t i n g e v i d e n c e s l i k e b i l l s a n d v o u c h e r s o f e x p e n d i t u r e a s s t a t e d a b o v e a n d a l s o f a i l e d t o f u r ni s h c o m p l e t e d e t a i l s o f p r o j e c t s a l o n g w i t h p r o o f o f n e c e s s a r y a pp r o v a l s f r o m L o c a l A u t h o r i t y a s m e n t i o n e d i n a b o v e n o t i c e , v i d e e - m a i l n o t i c e d a t e d 2 1 . 1 2 . 2 0 1 7 , t h e a s s e s s e e w a s r e q u e s t e d t o s h ow c a u s e a s t o w h y N e t P r o f i t @ 1 0 % s h o u l d n o t b e e s t i m a t e d o n i t s t u r n o v e r b y r e j e c t i n g t h e b o o k s o f t h e a s s e s s e e u / s 1 4 5 ( 3 ) o f th e A c t . (i e . w h y d i s a l l o w a n c e o f u n r e a s o n a b l e a n d e x c e s s i v e e x p e n d i tu r e s h o u l d n o t b e m a d e a n d c o n s e q u e n t l y G P s h o u l d n o t b e e s t i m a t e d a t 1 0 % ) H o w e v e r , i n r e p l y , i n s t e a d o f s u b m i t t i n g r e q u i r e d de t a i l s , a s s e s s e e a s k e d f o r a d j o u r n m e n t i n r e p l y d a t e d 2 2 / 1 2 / 2 0 1 7 ( 4 w o r k i n g d a y s l e f t b e f o r e t i m e b a r r i n g d a t e ) w h i c h c l e a r l y s h o w s d e l a y i n g a t t i t u d e o f a s s e s s e e r a t h e r t h a n s u b m i t t i n g d e t a i l s t o f a c i li t a t e a s s e s s i n g o f f i c e r u n d e r s t a n d t h e r e a s o n a b l e n e s s a n d e x p e d i e n cy o f t h e t r a n s a c t i o n s . 3 . 1 . 7 A s s t a t e d a b o v e , t h e a s s e s s e e f a i l e d t o p r o d uc e / f u r n i s h e d j u s t i f i c a t i o n a s w e l l a s s u p p o r t i n g e v i d e n c e s l i k e b a s i s o f WI P , c o p y o f b i l l s a n d t r a n s p o r t a t i o n d e t a i l s o f e x p e n d i t u r e c l a i m e d i n i t s b o o k s , p a r t y - w i s e l e d g e r a c c o u n t o f p u r c h a s e s a n d se r v i c e s a n d a l s o f a i l e d t o f u r n i s h p r o j e c t - w i s e d e t a i l s w i t h c o p y n ec e s s a r y a p p r o v a l ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 11 – p r o o f . T h e r e f o r e a s s e s s e e d e f i n i t e l y d e f a u l t e d i n th i s r e s p e c t . F u r t h e r , d i s c r e p a n c i e s a s d i s c u s s e d i n a b o v e p a r a s h a v e a l s o b e e n f o u n d i n t h e n e t p r o f i t r e s u l t s h o w n b y t h e a s s e s s ee d u r i n g t h e y e a r u n d e r c o n s i d e r a t i o n . I n a b s e n c e o f d e t a i l s o f c l o s in g s t o c k a n d e x p e n d i t u r e c l a i m e d b y t h e a s s e s s e e , i t i s n o t p o s si b l e t o v e r i f y t h e g e n u i n e n e s s o f c l a i m a n d c l o s i n g s t o c k s h o w n b y t h e a s s e s s e e i n i t s b o o k s . F u r t h e r i t c a n n o t b e p r o v e d t h a t a l l t h e p u rc h a s e s m a d e b y t h e a s s e s s e e a r e g e n u i n e . T h u s t h e r e i s n o e v i d e n c e t o v e r i f y t h e c l o s i n g s t o c k a s w e l l a s e x p e n d i t u r e c l a i m e d o n a c co u n t o f p u r c h a s e s a n d s e r v i c e s . A c c o r d i n g l y i t i s n o t p o s s ib l e t o f a i r l y d e d u c e t h e i n c o m e o f t h e a s s e s s e e i n a b s e n c e o f q u an t i t a t i v e s t o c k r e g i s t e r a n d v e r i f i c a t i o n o f c l o s i n g s t o c k a s w e l l a s i n a b s e n c e o f d e t a i l s a n d s u p p o r t i n g d o c u m e n t a r y e v i d e n c e s o f v a ri o u s e x p e n d i t u r e c l a i m e d b y t h e a s s e s s e e . F u r t h e r , i t i s p e r t i n e n t t o m e n t i o n h e r e t h a t d u r i n g t h e r e l e v a n t y e a r , t h e r e wa s h u g e d e c l i n e i n t h e n e t p r o f i t 7 8 . 8 2 % f r o m t h e l a s t a s s e s s m e n t ye a r 2 0 1 4 - 1 5 d e s p i t e o f i n c r e a s e i n s a l e s / t u r n o v e r b y a l m o s t 4 t i m e s . 3 . 1 . 8 T h e a b o v e n a r r a t e d f a c t s d e m o n s t r a t e u n r e l i a bi l i t y o f b o o k s a n d c o n s e q u e n t l y , t h e p r o f i t m a r g i n s h o w n b y t h e a ss e s s e e . T h e b o o k s m a i n t a i n e d b y t h e a s s e s s e e a r e d e f e c t i v e a n d u n d e r t h e c i r c u m s t a n c e s t h e b o o k r e s u l t c a n n o t b e a c c e p t e d . Th e r e f o r e , b o o k s o f a c c o u n t o f t h e a s s e s s e e i s r e j e c t e d u / s 1 4 5 ( 3 ) of t h e A c t . L o o k i n g i n t o e n t i r e t y o f t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e , s i n c e , t h e a p p e l l a n t h a s i t s e l f s h o w n n e t p r o f i t o f 1 7 . 8 2 % i n t h e p r e v i o u s A s s e s s m e n t Y e a r 2 0 1 4 - 1 5 . H o w e v e r , l o o k i n g t o t h e f ac t t h a t t h e t u r n o v e r o f t h e a s s e s s e e i s i n c r e a s e d f r o m t h e p r e vi o u s y e a r , t h e n e t p r o f i t r a t e o f 1 0 % i s t a k e n f o r t h i s y e a r , c o m p a r e d t o ( - ) 6 1 % s h o w n . A c c o r d i n g l y , N e t P r o f i t i s e s t i m a t e d @ 1 0 % w h i c h c om e s t o R s . 5 4 , 0 2 , 5 4 5 / - a n d a c c o r d i n g l y t h e i n c o m e o f a s s e s se e i s d e t e r m i n e d a t R s . 5 4 , 0 2 , 5 4 5 / - P e n a l t y p r o c e e d i n g s u /s 2 7 1 ( 1 ) ( c ) o f t h e A c t a r e s e p a r a t e l y i n i t i a t e d o n t h i s i s s u e f o r f u r n i s h i n g i n a c c u r a t e p a r t i c u l a r s o f i n c o m e . ” 15. It is found fro m t he above reasons as recorded by th e AO that books of acco unts were not re je cted on fli ms y gro und. It is a settled principle that books of accounts maintained by the assessee must be s upported by evidences in the for m of vouchers, bills etc. and all re ceipts and pa ymen ts must be properl y vouched and supported. These are pri mar y evidences towards various expenditures claimed as deduction by the assessee for purchase of material and for other expenses as well. Th e AO had ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 12 – specifically pointed out that the copy of bills and the delivery challan for purchases were not produced, neither any supporting evidence for expenditure as claime d in the books of accounts were brought on record. Further, the party-wise ledger account of purchases and expenses were not provided, which prevented the AO fro m making any enquir y in this respect. The assesse was duty-bound to support the accounts maintained by i t with the basic details and in the absence of pri mar y evidences of bills, vouchers, challans, part y- wise ac counts etc., it was not possible to rely on the veracity of the accounts maintained by the assesse. The quantitative details and workings of WIP were also not produced. As men tioned earlier, the sales had increased al most four-times during the year and the purchases during the yea r had declined to Rs.59.32 Lakhs only as against purchase of Rs.1.25 crores in the prece ding year and in spite of these events there was a huge loss during the year , which had raised the eyeb row of the Depart ment. The assesse was dut y- bound to produce the details and infor mation as called for b y th e AO and explain the reason for the abnor mal loss incurred d uring the yea r. The non- production of the details as mentioned earlier and the analysis of the accounts and infor mation as available led the AO to conclude that either the sales were booked at lower than its cost price or the WIP was shown at a mu ch lower a mount than what it should actually happen. The assesse has not explained as to wh y the details and the infor mation as re quired by the AO wer e not produced either before the AO or in the course of the appeal proceedings. In view of the defects a s pointed out by the AO and for the failure on the part of the asse ssee to produce the relevant ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 13 – details as required by the AO we find that the AO was justified in rejecting the accounts of the assessee and estimating the income on a reasonable basis. 16. The assessee has relied upon the various judicial pronounce ments. It is found that the facts involved in all those cases were differe nt. In the case of Vikra m Plastics (supra) the Assessing Officer had rejected the books of account maintained by assessee and made disallowance under section 4 0A(2)(a) in respect of lease re nt and also on account of excess raw materials consumed. The Tribunal found on facts that there was no discrepancy or defects in books of account maintained b y assessee on merca ntile syste m of ac counting and that the books of account maintained b y assessee were not found to b e incorrect or incomplete and no material was brought on record to prove that purchases and expenses had been inflated or sales had been suppressed. The Hon’ble Gu jrat High Court held that the findings recorded by Tribunal were findings of facts and no referable question of law a r ose therefro m. Th e facts of that cas e we re thus different fro m the present case. He r e, the assesse itse lf has not produced the required details which raises a question mark on the correctness and completeness of the accounts. In the absence of details of purchases, sales and expenses the AO could not have made an y enquiry to verif y their cor rectness. 17. In P a n k a j D i a m o n d ( s u p r a ) the book result of the dia mond trader wa s rejected onl y on the ground that quality- wise details of diamonds were not kept by the assesse and addition was ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 14 – made on esti mate basis without bringing on record any material to show that the a ssessee had earned an y inco me in ex cess of the a mount disclosed in the return. The coordinate Be nch of this tribunal had held as under: “The book result of the assessee diamond trader were rejected by the lower authorities only on the ground that quality-wise details of diamonds were not kept by the assessee. The addition was made merely on estimate basis without bringing on record any material to show that the assessee had earned any income in excess of the amount disclosed in the return. It is an established position of law that even after rejecting the book result if the assessing authority adds any income to the income declared by the assessee, then, the said addition has to be based on some material and the same cannot be added on the whims or caprice of the assessing authority. In the instant case, it was observed that the trading result shown by the assessee compared favourably with the past accepted position in the case of the assessee itself. Therefore, merely rejecting the book result on the ground that quality-wise details of diamonds had not been maintained would not empower the Assessing Officer to add any income to the income shown by the assessee.” The assesse in that case was not only in a different trade but the books were rejected due to absence of quality-wise details of diamonds. Further, the book results in that case were comparable with past results. Thus the facts are found to be totally different. 18. In the case of Nice Industries (supra), the assessee was engaged in the process of yarn and had maintained records of quantity of yarn including opening stock, closing stock, purchases, sales oil gain etc. The AO had noted that gross profit ratio of the assesse had fallen steeply as compared to two preceding years which was explained due to shift in office and due to the partners not paying attention to manufacturing/business. It was stated that the sale of texturised yarn/twisted yarn/dyed yarn/grey clothes in Surat Textile Market depended upon commission agents. The AO did not accept the explanation of the assessee and rejected the book results and estimated the gross profit @ 11.15 per cent i.e., average of preceding two years. It was ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 15 – on consideration of these facts that the Coordinate Bench of this Tribunal had held that the AO had rejected the book results of the assessee without pointing out any defect in the books and consequential estimation of profit by the Assessing Officer was without any basis. The assessee had produced records before the AO and no defect in the books was pointed out and there was no unaccounted production and sales as well and the AO had rejected the book results but found no defects in the books of account of the assesse. 19. In the case of Asian Grantio India Ltd. (supra), the Assessing Officer had rejected the book results of the assessee based on the finding that there was less production of tiles in comparison to the companies available in the public domain and non-maintenance of production registers properly. In the light of these facts, the Assessing Officer invoked the provisions of section 145(3) of the Act and made certain upward additions on account of suppressed production which was sold outside the books. It was on these facts that the Coordinate Bench of this Tribunal had held that the AO did not point out any defect in the details of the consumption of raw materials furnished by the assesse and that the books of account cannot be rejected until and unless the AO pointed out any specific mistake. 20. In the case of Dinesh Tiles Factory (supra), the assesse was doing business of manufacturing of cement tiles of three qualities, i.e., plain tiles, gray mosaic tiles and colour tiles and also dealt in purchase and sale of marble and various types of stones. The AO had rejected the books of accounts on finding the following defects: (i) no stock register of raw material or semi-finished goods or finished goods was maintained nor any daily manufacturing account was prepared, ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 16 – (ii) the production of various types of tiles was not verifiable with reference to specific quantity of raw materials consumed during the production process and wastage/breakage and scrap was also not verifiable as neither such record was maintained nor made available, and (iii) claim of maintenance of quantity was not substantiated and the only quantity maintained and made available was on the basis of purchase and sales accounts. The Coordinate Bench of this Tribunal held that the type of business carried on by the assessee reflected special features attached to the nature of the business which made it rather impossible to maintain day-to-day quantitative tally in respect of the consumption, production and disposal of the stocks at various levels. Further, the assessee had produced before the Tribunal, the relevant sales registers wherein various details were given in respect of the sales bills prepared against which the goods were delivered together with the challan number, etc. On consideration of these facts it was held by the Ld. Tribunal that there was no reason to reject either the books of account or to make any addition. 21. In the case of Panchshil Exim Pvt. Ltd (supra) the AO had found that the assessee had sold certain products at a price less than the cost of acquisition which resulted in gross loss to the assessee. The AO doubted that the assessee had suppressed sale price by showing sale of the goods at loss and accordingly rejected the books of accounts under section 145(3) of the Act. The Ld. ITAT held that before rejecting the books of accounts, the AO must record the specific reason for rejecting the books of accounts and that such satisfaction has to be established and substantiated based on facts and figures, which depended ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 17 – on the circumstances of each case. It was held that mere minor mistakes/typological errors/absence of stock registers/lower GP may not ipso facto amount to incorrectness/incompleteness of accounts in terms of section 145(3) of the Act. But the case would be different where the above-mentioned mistakes are coupled with other findings. 22. In the case of Brij Bhushan Lal Parduman Kumar (supra), the assessee was a Military Engineering Service’s contractor and for execution of Engineering services works and certain materials were supplied at fixed rate by the Government. Though, such materials were in the custody of the contractors, they always remained the property of the Government. The AO had rejected the books results for the reason that the details of materials supplied from Government was not furnished. The matter travelled up to the Hon’ble Supreme Court and the Apex Court held that no element of profit was involved in the turnover represented by the materials supplied by the MES to the assessee. 23. It is thus found that the above discussed as well as other case laws relied upon by the assessee have all been rendered in different set of facts. In the present case the Assessing Officer has given specific reason for rejecting the books of account. He has recorded his satisfaction in this respect and has established and substantiated his reason based on facts and figures. It is an undisputed fact in this case that during the course of assessment proceedings the assessee did not produce the books of account and other documents as sought by the Assessing Officer. Therefore, the Assessing Officer has rejected the books of account of the assessee under section 145(3) of the Act and estimated the income. In the case of Skyline Builders (supra) relied upon by the Reve nue the ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 18 – rejection of books of accounts for non-production of evidences in support of expenses was upheld. 24. It is thus found that the facts involved in all the c ases relied upon by the assesse were diffe rent and the ratio of those decisions can’t be i mported to the f acts of the present case. It is found that the AO has re jected the books of accounts in this case for valid re asons. The assesse didn’t respond to the opportunity provided by the AO for re jection of acco unts and estimation of income . It was the assesse itself who was to be bla med for re jection of accounts as it didn’t sub mit proper accounts as called for b y the AO. Ha ving failed to provide the pri mar y evidences and to provide the other details as required by the AO, the as sesse can’t bla me the AO for re jection of accounts. The assesse can’t be absolved fro m its responsibility of supporting the accounts with proper evidences and explaining the huge loss incurred during the ye ar. 25. Once the books of account are rejected and the assessee is not co-operating, the only option left with the Assessing Officer was to estimate reasonable income after taking into account the total receipts of the year. The AO e stimated the income of the assessee @ 10% for the reason that net profit disclosed by the assessee in the preceding year was 17.82%. The r ate of esti mate of 10% as applied by the AO is found to be reasonable. The work of the assessee is mostly in the nature of civil construction and estimation rate of 10% is prescribed u/s. 44BBB of the Act to co mpute the profit and gain of the foreign companies engaged ITA No. 317/Ahd/2022 (Shivam Builders Private Limited vs. DCIT) A.Y.– 2015-16 - 19 – in the business of civil construction. Considering the presumptive rate of taxation as prescribed under the Act, the estimation as ma de b y the AO is found to be re a sonable. Therefore, we ar e not inclined to interfere in the quantum aspect as well and disturb the estimation of income as made by the AO and as upheld by the CI T( A). 26. In the result, appeal filed b y the asse ssee is dismissed. This Order pronounced on 09/05/2024 Sd/- Sd/- (SUCHITRA RAGHUNATH KAMBLE) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 09/05/2024 S. K. SINHA True Copy आदेश कᳱ ᮧितिलिप अᮕेिषत आदेश कᳱ ᮧितिलिप अᮕेिषतआदेश कᳱ ᮧितिलिप अᮕेिषत आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant 2. ᮧ᭜यथᱮ / The Respondent. 3. संबंिधत आयकर आयुᲦ / Concerned CIT 4. आयकर आयुᲦ(अपील) / The CIT(A)- 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडᭅ फाईल / Guard file. आदेशानुसार आदेशानुसारआदेशानुसार आदेशानुसार/ BY ORDER, उप उपउप उप/सहायक पंजीकार सहायक पंजीकारसहायक पंजीकार सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद / ITAT, Ahmedabad