Sh. Satish Aggarwal & Company, Amritsar. V. The Addl. Commissioner of Income-tax, Amritsar.

ITA 328/ASR/2013

• Counselvise Citation: 32820914 RSA 2013
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-08-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 14-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Question of law; Corroborative evidences

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.328(ASR)/2013 ASSESSMENT YEAR:2009-10 PAN :AAQFS0788M M/S. SATISH AGGARWAL & COMPANY, VS. ADDL. COMMR. OF INCOME TAX, RAM TIRATH ROAD, AMRITSAR. RANGE-V, AMRITSAR. (APPELLANT) (RESPONDENT) I.T.A. NO.483(ASR)/2013 ASSESSMENT YEAR:2009-10 PAN :AAQFS0788M ADDL. COMMR. OF INCOME TAX, VS. M/S. SATISH AGGARW AL & COMPANY, RANGE-V, AMRITSAR. RAM TIRATH ROAD, AMRITSAR. (APPELLANT) (RESPONDENT) ASSESSEE BY:SH.ASHWANI KALIA, CA RESPONDENT BY:SH. MAHAVIR SINGH, DR DATE OF HEARING:12/08/2013 DATE OF PRONOUNCEMENT:26/08/2013 ORDER PER BENCH ; THESE CROSS APPEALS OF THE ASSESSEE AND THE REVENU E ARISE FROM THE ORDER OF THE CIT(A), AMRITSAR DATED 30.04.2013 FOR THE ASSESSMENT YEAR 2009-10. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 2 1. THAT LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE AO WAS JUSTIFIED IN REJECTING THE BOOKS OF AC COUNT BY INVOKING THE PROVISIONS OF SECTION 145(3). 2. THAT THE ORDER OF THE CIT(A) IS PERVERSE IN CONFIRM ING THE REJECTION OF BOOKS OF ACCOUNT ON THE BASIS OF ALLEG ED DEFECTS IN THE BOOKS OF ACCOUNT POINTED OUT BY THE AO COMPLETE LY IGNORING THE FACT THAT THE ASSESSEE HAD FILED PROPE R AND JUSTIFIABLE EXPLANATION AGAINST THE SO CALLED DEFEC TS AND ACCORDINGLY DID NOT WARRANT THE REJECTION OF BOOKS OF ACCOUNT. 3. THAT LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HO LDING THAT NET PROFIT RATE OF 8% BE APPLIED ON THE GROSS CONTR ACT RECEIPT/TURNOVER WITH TOTAL DISREGARD TO THE DECLAR ED RESULTS FOR THE CURRENT YEAR AND FOR THE PRECEDING YEARS AS A R ESULT OF WHICH THE ORDER PASSED BY THE LD. CIT(A) IS PERVERSE. 4. THAT IN ANY CASE THE RATE OF NET PROFIT AT 8% IS HI GHLY EXCESSIVE KEEPING IN VIEW THE QUANTUM OF TOTAL CONTRACT RECEI PTS AND PAST HISTORY OF THE CASE IN WHICH THE BOOK RESULTS HAVE ALWAYS BEEN ACCEPTED BARRING SMALL DISALLOWANCE AND ADDITIONS. 5. THAT THE LD. CIT(A) WHILE ESTIMATING NET PROFIT @ 8 % HAS WRONGLY NOT ALLOWED. A) CLAIM OF DEPRECIATION AMOUNT TO RS.33,43,247/- B) DEDUCTION OF THE FOLLOWING AMOUNTS FROM THE GROSS CONTRACT RECEIPTS. I) VALUE OF MATERIALS SUPPLIED BY THE CONTRACTEES AMOUNTING TO RS.55,78,979/-. II) VAT/SALES TAX RS.97,24,885/- III) LABOUR CESS RS.5,06,243/- 6. THAT THE ORDER OF THE CIT(A) IS BAD IN LAW AND ON F ACTS. 7. THAT THE APPELLANT CRAVES LEAVE TO ADD TO OR AMEND THE AFORESAID GROUNDS BEFORE DISPOSAL OF APPEAL. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: 3 1. WHETHER THE LD. CIT(A) IS CORRECT IN DETERMINING TH E NET PROFIT AT 8% ON THE GROSS CONTRACT RECEIPTS/TURNOVER INSTE AD OF 10% ON THE GROSS CONTRACT RECEIPTS/TURNOVER AS TAKEN BY TH E A.O. 2. WHETHER THE LD. CIT(A) IS CORRECT IN NOT CONSIDERIN G THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SHIVAM CONSTRUCTION CO. VS. CIT-III, LUDHIA NA IN ITA NO.167/2007 RELIED UPON BY THE A.O. 3. APPELLANT CRAVES LEAVE TO AMEND OR ADD ANY OR MORE GROUNDS OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM IS CARRYING OUT CIVIL CONTRACT OF CONSTRUCTION WORK OF LAYING/CONST RUCTION OF/EXPANDING OF ROADS FOR VARIOUS GOVT. AGENCIES AND PARTLY FOR OT HER PRIVATE CONCERNS ON JOB WORK BASIS. THE BOOKS OF ACCOUNT WERE REJECTED BY T HE A.O. BY PASSING ORDER UNDER SECTION 143(3)/144 OF THE ACT AND COMPUTED IN COME BY APPLYING NET PROFIT RATE OF 10% RELYING UPON THE DECISIONS OF VA RIOUS COURTS OF LAW. THE REASONS FOR REJECTING THE BOOKS OF ACCOUNT BY THE A .O. ARE MAINLY THE FOLLOWING: 1) WAGES PAYABLE AS ON 31.3.2009 WAS TO THE TUNE OF RS.1,19,34,800/-. THE AO DISPATCHED VERIFICATION L ETTERS TO 42 PERSONS AS PER ADDRESSES FORWARDED BY THE ASSESSEE. 7 LETT ERS COULD NOT BE DISPATCHED DUE TO LACK OF PROPER ADDRESSES AND 11 LETTERS CAME BACK UNSERVED WITH POSTAL REMARKS NO SUCH PERSON IS AV AILABLE- RETURNED TO THE SENDER. 2. THE ASSESSEE FAILED TO SUBMIT SITE-WISE MUSTER ROLLS STATING THAT ONLY FEW MUSTER ROLLS WERE MAINTAINED AND AFTER TA KING ATTENDANCE OF LABOUR AT ONE SITE, THE MUSTER ROLL IS SENT TO THE OTHER SITE. THIS WAS HIGHLY IMPOSSIBLE AS THE SITES OF CONTRACT WERE SP READ FROM H.P., J & K AND IN PUNJAB FROM PATHANKOT TO AMRITSAR. 4 3. THE MUSTER ROLL CARRIES THUMB IMPRESSION OF ONE OR TWO PERSONS ONLY. 4. THE WAGES PAYABLE IN THE LAST MONTH WAS MORE TH AN 1/3 RD (38.52%) OF WAGES OF THE ENTIRE YEAR WHICH MADE TH E AO TO CONCLUDE ADJUSTMENT ARRANGEMENTS MADE BY THE ASSESSEE IN TH E BOOKS OF ACCOUNT. THE AO IS ALSO OF THE OPINION THAT AS THE WAGES HAVE BEEN PAID UPTO TO JULY NEXT YEAR, THE WAGES DEBITED TO THE RECEIPT AND EXPENDITURE A/C ARE LIKELY TO BE ADDED BACK TO THE INCOME FOR THE FINANCIAL YEAR. 5. NO STOCK REGISTER FOR PURCHASES OF SAND, SOIL, CRUSHER, CEMENT, BRICKS, BITUMEN AND LDO WERE MAINTAINED BY THE ASS ESSEE. THE AO WAS OF THE OPINION THAT IN THE ABSENCE OF STOCK RE GISTER, REAL ESTIMATE IN THE ASSESSEES CASE IS NOT ACCEPTABLE. 6. FOR EARTH PURCHASES OF RS.2,56,85,500/- ONLY HA ND MADE VOUCHERS WITH THUMB IMPRESSION OF THE SELLER WAS P RODUCED WITHOUT ADDRESSES OF THE SELLER. NO BILLS WERE ANNEXED TO THE VOUCHERS. 7. THE AO ALSO POINTED OUT IRREGULAR PAYMENTS MADE TO M/S. SAINI STORE CRUSHERS FOR PURCHASES MADE AND CASH PAYMENT S, FOR WHICH NO BILLS ARE AVAILABLE, MADE TO M/S. SATKAR STONE CRU SHER. 8. THE AO OBSERVED THAT PURCHASES ACCOUNT HAS DEBI TED THE SAME AMOUNT WHICH WOULD HAVE BEEN DEBITED IN THE EVENT OF CARRYING THE RAW MATERIALS BY SELLER TRUCKERS AND THEREBY INFLA TING HIS PURCHASES BY DEBITING THE SIMILAR AMOUNT WHETHER HE USES HIS OW N VEHICLES TO THE VEHICLES OF THE SELLER. 4. BEFORE THE LD. CIT(A), THE ASSESSEE MADE THE SUB MISSIONS WHICH ARE VERY RELEVANT FOR OUR DECISION AND ARE BEING REPRO DUCED FOR THE SAKE OF CLARITY FROM PAGES 4 TO 11 OF CIT(A)S ORDER AS UN DER: THE APPEAL IS DIRECTED AGAINST THE ACTION OF THE AS SESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF THE I.T.ACT,1961AND IN COMPLETING THE ASSESSMENT AT 10% OF THE GROSS RECE IPTS AVOIDABLY IN 5 TERMS OF THE MANDATE OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE SHIVAM CONSTRUCTION CO. VS. CIT IN ITA NO.167/2007 . THAT APART THERE ARE TO SUBSIDIARY GROUNDS ALSO. THE APPELLAN T HAS FILED STATEMENT OF FACTS AND THE GROUNDS OF APPEAL ON WH ICH DUE RELIANCE IS PLACED. 2. BRIEFLY STATED THE APPELLANT IS A CIVIL CONTRAC TOR IN THE BUSINESS OF ROAD CONSTRUCTION. THE TOTAL RECEIPTS FROM THE SAID ASSIGNMENTS DURING THE YEAR HAVE BEEN AT OVER RS.23 CRORES. TH E APPELLANT IS A REGULAR INCOME-TAX ASSESSEE MAINTAINING PROPER BOO KS OF ACCOUNTS IN THE USUAL COURSE OF BUSINESS WHICH HAVE BEEN SUBJE CTED TO TAX AUDIT U/S 44AB OF THE ACT. THE RESULTS DISCLOSED BY THE ASSESSEE HAVE BEEN FOUND GENERAL ACCEPTANCE WITH THE DEPARTMENT IN TH E PAST. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, SE VERAL QUESTIONNAIRES WERE ISSUED BY THE AO UPTO 24.11.20 11. VARIOUS INFORMATION AS SOUGHT BY THE AO IN TERMS OF THE S AID QUESTIONNAIRES INCLUDING THE EARLIER ONES DATED 29.06.21011 AND 0 9.11.2011 WERE ALL DULY ANSWERED. SUDDENLY ON 09.12.2011 THE AO EVEN WITHOUT PURSUING THE BOOKS OF ACCOUNTS OR AUDIT REPORT U/S 44AV OF THE ACT, ISSUED A SHOW CAUSE TO THE APPELLANT TO REPLY AS TO WHY THE BOOKS OF ACCOUNTS SHOULD NOT BE REJECTED U/S 145(3) OF THE ACT AND A RATE OF 10% PROFIT ON GROSS RECEIPTS SHOULD NOT BE COMPUTED FOR INCOM E IN TERMS OF THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COUR T IN THE CASE OF SHIVAM CONSTRUCTION CO. VS. CIT. THIS ASPECT OF TH E MATTER CAN BE VERIFIED FROM THE CASE RECORDS. THE AVERMENT IS C RUCIAL TO THE CAUSE OF THE APPELLANT. IT IS RESPECTFULLY SUBMITTED THA T THE AO WITH A FIXED MIND SET PURPOSE AND WITHOUT ANY REFERENCE TO ANY EVIDENCE OR MATERIAL ON RECORD WHATSOEVER TOOK THE DECISION ON 09.12.2011 TO REJECT THE BOOKS OF ACCOUNT. SUCH A COURSE WAS DEC IDED UPON WITHOUT EVEN SCRUTINIZING THE BOOKS. A RATE OF 10% WAS DE CIDED TO BE APPLIED PURPORTEDLY IN TERMS OF PUNJAB & HARYANA HIGH COUR T DECISION IN THE CASE OF SHIVAM CONSTRUCTION CO; WITHOUT EVEN ADVE RTING TO THE SIMILARITY OR OTHERWISE OF THE CASES AND EVEN WITH OUT HAVING A COPY OF THE CITED ORDER. IT IS FURTHER STATED THAT THE OTH ER REASONS CITED LATER ON AND BROUGHT ON RECORD FOR REJECTION OF BOOKS OF AC COUNTS WERE MERE ALIBIS AND PRETEXTS WHICH HAD BEEN DONE SO ONLY TO BUTTRESS THE CAUSE AS ESPOUSED BY AO IN TERMS OF THE LETTER DATED 09. 12.2011. WHILE SO DOING COPIOUS AND IRREFUTABLE EXPLANATION WITH EVI DENCE IN REBUTTAL AS TENDERED UNDER COVER OF APPELLANTS LETTERS TO THE AO DATED 16.12.11 6 (TWO REPS) 28.212.11, 26.12.11 AND OTHER ORAL IMP LORATIONS WERE ALL ARBITRARILY IGNORED OR REJECTED OUT OF HAND. 4. THE FIRST OBJECTION CITED BY THE AO IS WITH REG ARD TO THE INABILITY OF THE APPELLANT TO CONFIRM WAGES PAYABL E THROUGH DIRECT ENQUIRIES FROM 42 OUT OF OVER 1000 LABOURERS. AS T O THE DEFICIENCIES AS CITED BY THE AO IN THE IMPUGNED ORDER, THEY ARE BO TH FARCICAL AND FALLACIOUS. THE AO SOUGHT CONFIRMATION FROM AROUND 42 LABOURERS IN RESPECT OF WAGES PAYABLE TO THEM FOR A PART OF THE MONTH OF MARCH, 2009. SEVEN OF THESE ENQUIRY LETTERS WERE NOT DISP ATCHED BECAUSE THE ADDRESSES WERE APPARENTLY INCOMPLETE. FURTHER ELEV EN OF THEM WERE RETURNED BY THE POSTAL AUTHORITIES UNSERVED. BUT A S TO THE FATE OF THE REST OF THE TWENTY FOUR, LETTERS SENT OUT FOR VERI FICATION, THERE IS NO EVEN A WHISPER OF A COMMENT BY THE AO. IT WAS EXPLAINE D TO THE AO IN GREAT DETAIL THAT THE APPELLANTS JOB IS LABOUR IN TENSIVE AND THAT THE LABOURERS WERE HARD TO SEEK AND VERY DIFFICULT TO BEGET. THEY CAME IN BATCHES THROUGH THE GOOD OFFICES OF HEAD-MEN AND W ERE RETAINED FOR WORK AS THEY CAME WITHOUT ANY DEDICATED EFFORTS AS TO THEIR ANTECEDENTS AND ADDRESS. LABOURERS WERE GENERALLY BEING ILLITERATE WHO FOUND IT DIFFICULT TO COMMUNICATE THE ADDRESS CORRECTLY AND COMPLETELY. THE TWO LETTERS ADDRESSED TO THE AO DA TED 16.12.11 ON THIS POINT ARE SELF-CONTAINED AND SELF-EXPLANATORY AND WORTHY OF A CAREFUL PERUSAL. IT WAS ALSO EXPLAINED TO THE AO T HAT THE RATIO OF WAGES TO THE RECEIPTS IN THIS BUSINESS WAS GENERA LLY IN THE VICINITY OF 26% WHICH RESULT HAS BEEN DULY ACCEPTED MORE PARTI CULARLY IN SCRUTINY ASSESSMENT IN AY 2007-08 IN THE APPELLANT S OWN CASE BY THE AO. IN THE CURRENT YEAR AGAINST THE RECEIPTS OF RS .23.09 CRORES WAGES HAVE BEEN IN QUANTUM OF RS.5.83 CRORES GIVING AN A VERAGE OF AROUND25.26% WHICH BEING EVEN LESS THAN THE ACCEPT ED RATE OF 26.67% IN THE PRE-PRECEDING YEAR MERITED TO BE ACC EPTED ON ITS OWN AS DECLARED WITHOUT ANY OTHER SUPPLEMENTARY MATERI AL OR SUPPORTING EVIDENCE. IT WAS ALSO POINTED OUT DURING THE ASSES SMENT PROCEEDINGS THAT THE AO HAD ERRED IN CONSTRUING THE TURNOVER T O WAGES RATIO IN THE MONTH OF MARCH 2009 AT 38.52%. PLEASE SEE ASSESSME NT ORDER AT PAGE 4.THE CORRECT FIGURE WAS ACTUALLY IN A SUM OF RS.8 ,69,23,888/- FOR RECEIPTS IN MARCH, 2009 AGAINST WAGES OF RS.2,24,8 5.000/- WHICH GAVE A COMPARABLE RATIO OF AROUND 25.86%. THE FIGURE OF 38.52% POINTED OUT BY THE AO WAS THUS COMPLETELY WRONG. IN THIS WAY THE WHOLE EDIFICE OF THE ADDITION BASED ON EXCESSIVE WAGES A S A BUILT BY THE AO COLLAPSES. THE CHARTS FILED IN THIS CONNECTION DU RING ASSESSMENT ARE 7 ANNEXED. INTERESTINGLY, THE WAGES TO RECEIPT RATIO IS AT AN UNASSAILABLE 25.21% FOR THE YEA. BEING MOST SATISFACTORY AND CO NFORMING, IT MERITED IMMEDIATE AND READY ACCEPTANCE. 5. THE AO HAS ALSO COMPLAINED OF THE INADEQUACIES IN THE MUSTER ROLLS AND THE DUPLICATION OF SIGNATURES IN SOME OF THEM. IT WAS EXPLAINED THAT SIMILARITY OF SIGNATURES WOULD BE B ECAUSE OF THE HEADMAN COLLECTING THE WAGES ON BEHALF OF OTHER L ABOURERS. THAT WAS BECAUSE THE SITES WERE FAR REMOVED FROM THE DISBUR SEMENT OFFICE AND THE LABOURERS COULD NOT BE PARADED FOR COLLECTION OF THEIR DUES AND THEREFORE, INSTEAD OF ALL OF THEM TROOPING TO THE OFFICE AFTER TRAVELING LONG DISTANCE, IT WAS GENERALLY FOUND CONVENIENT B Y SOME TO ASSIGN ONE OF THEIR REPRESENTATIVES TO COLLECT THE WAGES ON THEIR BEHALF. BESIDES THE MUSTER ROLLS AFTER RECEIPT FROM SITES WERE ALL STITCHED AND BOUND AND RETAINED FOR RECORDS. NO CONCEIVABLE OBJ ECTION COULD BE TAKEN BY ANY ONE FOR SUCH A PRACTICE. AT ANY RATE THE COMPLYING WAGES TO RECEIPT RATIO OUGHT TO HAVE DISPELLED ALL MANNE R OF DOUBTS WITH THE A.O. 6. THE OTHER OBJECTION WHICH WAS TAKEN BY THE AO W AS WITH REGARD TO NON-MAINTENANCE OF STOCK REGISTER. IT WAS EXPLA INED TO THE AO THAT THE MATERIAL LIKE SAND, SOIL, BAJRI, CEMENT, BITUM EN, BRICKS ETC. ARE ALL STACKED NEAR HOT-MIX PLANT WHICH ARE THEN POURED I NTO THE HOT-MIX PLANT DURING THE LAYING OPERATIONS. IT WAS ALSO EX PLAINED THAT NONE OF THESE ITEMS ARE CAPABLE OF PILFERAGE, MIS-USE OF M IS-APPROPRIATION BY ANYONE. THEY WERE ALL LOW COST ITEMS AND CAME IN A HUGE MASS. ANY ABSTRACTION, IF ANY, WAS JUST OF NO CONSEQUENCE. T HE CHOWKIDAR AT THE SITE LOOKED AFTER THEIR SAFETY AND SECURITY. THE S ITE STAFF VIGILANTLY MONITORED THEIR CONSUMPTION AND USE. IT WAS ALSO E XPLAINED HAT DIESEL OIL (LDO) WAS RETAINED IN TANKS NEAR HOT-MIX PLANT UNDER THE STRICT VIGILANCE AND CONTROL OF THE SUPERVISORY STAFF. TH ERE WAS A RIGOROUS PROCEDURE IN VOGUE FOR THE ISSUE OF THE LDO TO THE VARIOUS TANKERS, TIPPERS AND TRUCKS OWNED BY THE APPELLANT. THE REQ UISITE RECORDINGS WERE MADE IN THE RELEVANT REGISTERS MAINTAINED AT THE SITE. ALL SUCH WERE SUBJECTED TO A ROBUST INTERNAL CHECK SYSTEM. LDO WAS ALSO EXTENSIVELY USED FOR FIRING TO MELT THE BITUMEN TO BOILING POINT. EVERYTHING WAS BEING DONE UNDER THE STRICT VIGILA NCE AND ON THE BASIS OF AN EFFICACIOUS INTERNAL CONTROL SYSTEM THROUGH DEDICATED AND RESPONSIBLE STAFF RETAINED AT THE SITE FOR THE PUR POSE TO OBLITERATE ANY POSSIBILITY OF ANY LEAKAGE OR MISUSE. THE PROCEDUR E FOR THE ISSUANCE OF LDO AND FOR CAUSING REPLENISHMENT THERE-FOR WAS AL SO DULY EXPLAINED 8 TO THE AO. IT WAS BROUGHT TO HER NOTICE THAT WHEN THE GROSS PROFIT RATE FOR THE YEAR UNDER REVIEW COMPARED MOST FAVOURABLY WITH THE ACCEPTED FIGURES OF THE PRECEDING YEARS, THE FIGUR ES THEMSELVES SPOKE FOR THEIR AUTHENTICITY AND RELIABILITY AND THEREFO RE, THERE WAS NO ROOM FOR ANY DOUBTS OR MISGIVINGS. 7. A COMPLETE LIST OF PERSONS WITH ADDRESSES AND VOUCHERS OF SUPPLIERS WAS ALSO PROVIDED TO THE AO FOR ANY VERI FICATION THAT MAY BE DESIRED. HOWEVER, THE AO RETAINED ALL SUCH INFORMA TION ON RECORD AND WHILE FRAMING THE ASSESSMENT SIMPLY COMPLAINED OF LACK OF TIME FOR EFFECTING THE VERIFICATION. FAULT FOR THIS LAPSE C ANNOT BE PLACED AT THE DOORS OF THE APPELLANT. 8. AS TO PURCHASES, ONE OF THE OBJECTIONS OF THE A O IS WITH REGARD TO PAYMENT FOR CRUSHERS NOT HAVING BEEN MADE BILL- BY-BILL BY THE APPELLANT. IT WAS EXPLAINED TO THE AO THAT IN ORDE R TO BE ABLE TO MAINTAIN SOME HOLD AND CONTROL OVER THE SUPPLIERS SO AS TO ENSURE REGULAR AND UNINTERRUPTED SUPPLIES THE PAYMENTS WE RE DELIBERATELY DELAYED AND ONLY LUMP-SUM PAYMENTS WERE MADE. ALL THAT WAS DONE IN THE BEST INTERESTS OF THE BUSINESS SO AS TO ENSURE THAT MATERIAL AND MEN COMBINE OPTIMALLY TO PRODUCE THE BEST POSSIBLE RES ULTS. 9. ANOTHER POINT OF THE AO IS WITH REGARD TO SELF- MADE VOUCHERS FOR PURCHASE OF EARTH. AS TO THIS, IT WAS EXPLAINE D THAT EARTH WAS PROCURED FROM TRACTOR TROLLEY OPERATORS. THEY GET THE MATERIAL ON DIGGING FROM THE NEIGHBORING VILLAGES. BEING UNORG ANIZED THE TRACTOR TROLLEY OPERATORS DID NOT HAVE A REGULAR OFFICE SY STEM IN PLACE. THE EARTH BROUGHT BY THEM WAS ACCEPTED AT SITE BY THE APPELLANTS STAFF AFTER DUE INSPECTION AND MEASUREMENT AND THEREAFTE R IT WAS UNLOADED. BEFORE SO DOING WHILE TAKING TO STOCK AT SITE APPR OVALS WERE GRANTED ON THE BASIS OF VOUCHERS WHICH WERE MADE AT THE SI TE ITSELF. IT WAS FOR THIS REASON THAT THE VOUCHERS WERE INEVITABLY SELF -MADE. 10. THE ASSESSING OFFICER IN PARAGRAPH (III) OF PA GE NO. 7 AND 8 OF THE ASSESSMENT ORDER HAS STATED THAT THE ASSESSEE S PURCHASE RATE ARE SAME AS SUPPLIED THROUGH OUTSOURCE TRUCKS AND ASSE SSEES OWN TRUCKS. WE NEVER CLAIMED THAT PURCHASE RATE ARE DIFFERENT BUT THERE IS SAVING OF FREIGHT ON GOODS RECEIVED THROUGH ASSESSEES OWN TRUCKS. FREIGHT OF RS. 28,85,945/- HAS BEEN PAID BY THE AS SESSEE FOR THE GOODS RECEIVED THROUGH OUTSOURCE TRUCKS, WHEREAS NO FREI GHT HAS BEEN PAID 9 FOR GOODS RECEIVED IN ASSESSEES OWN TRUCKS. AS TH E ASSESSEE HAS SAVED HUGE AMOUNT OF FREIGHT AS WELL AS TIMELY SUPPLY OF GOODS. 11. AS TO OTHER DISCREPANCIES POINTED OUT BY THE A .O. IT WAS STATED THAT THEY ARE MISCONCEIVED, IMAGINARY AND UNCALLED FOR E.G. NON- DEDUCTION OF TDS FOR CIVIL WORKS OF RS. 75 LACS BY THE CONTRACTORS. IF THE CONTRACTOR MAKING THE PAYMENT TO THE APPELLANT HAD NOT MADE ANY DEDUCTION AT HIS END, IT WAS AT HIS PERIL. THERE C OULD BE SEVERAL REASONS SUCH AS HE WAS NO SO QUALIFIED TO MAKE ANY DEDUCTION. 12. THE SO CALLED DEFICIENCIES AS POINTED OUT BY THE A.O. WERE THUS EITHER ERRONEOUS OR INCONSEQUENTIAL. PET TY DEFICIENCIES WOULD NOT EVEN TAKEN CUMULATIVELY FORM THE BASIS O F REJECTION OF BOOKS. IT WAS PLEADED THAT THE ACCOUNTS MERITED TO BE ACCEPTED BEING OTHERWISE CORRECT HAVING BEEN DULY AUDITED AND COM PLETE. 13. SEVERAL DECISIONS OF VARIOUS TRIBUNALS AND HI GH COURTS WERE ALSO CITED WHICH ARE LISTED AT PAGE 9 OF THE ASSESSMENT ORDER. BUT WITHOUT CITING ANY REASON WITH SIMPLE OBSERVAT IONS THAT IT IS SEEN THAT THE CIRCUMSTANCES AND FACTS OF THE ABOVE MENTIONED CASES ARE DIFFERENT THE APPELLANTS CONTENTIONS HAVE BE EN REJECTED. 14. THE A.O. HAS HELD THAT THE FACTS OF THE PRESEN T CASE ARE SIMILAR TO PRABHAT KUMAR CASE WHERE I.T.A.T. CHANDIGARH AP PLIED 12% RATE AND THAT THE DECISION OF THE HON'BLE PUNJAB & HARY ANA HIGH COURT IN THE CASE OF SHIVAM CONSTRUCTIONS CO. WAS ALSO APPL ICABLE. THE HAS A.O. GONE ON TO SAY THAT EVEN IN THE CASE OF PRABH AT KUMAR 10% RATE HAS BEEN APPLIED BY THE JURISDICTIONAL HIGH COURT WHERE THE BOOKS OF ACCOUNTS HAD BEEN REJECTED AND FLAT RATE APPLICATI ON WAS DIRECTED. THE A.O. IN THE SAME VEIN HAS CITED THE CASE OF KUMAR BUILDERS. FOR SO DOING, THE A.O. RELIES UPON THE CASE OF SHIVAM CON STRUCTION CO. WHICH ACCORDING TO HER WAS ON SIMILAR FACTS. 15. AS STATED ABOVE THE A.O. HAD ALREADY TAKEN A DECISION ON 09.12.2001 TO REJECT THE BOOKS OF ACCOUNT U/S 145( 3) OF THE ACT. HOWEVER, THE A.O. WAS AWARE THAT SUCH A REJECTION COULD NOT BE MADE IN THE EVENT OF THE ASSESSEE MAINTAINING CORRECT A ND COMPLETE BOOKS OF ACCOUNT AND HAD DONE SO AFTER DUE COMPLIANCE WITH THE ACCOUNTING STANDARDS. IT IS FOR THIS REASON THAT THE A.O. HAS ATTEMPTED TO NIBBLE AT THE VERACITY OF THE ACCOUNT BY POINTING OUT INSIGN IFICANT AND INNOCUOUS 10 DEFECTS IN THE VOUCHERS. WHILE DOING SO THE A.O. L ITTLE REALIZED THAT THE SYSTEM OF ACCOUNTS AND THE NATURE OF THE BUSINESS REMAINED THE SAME AS THAT OF EARLIER YEARS AND WHICH ACCOUNTS AS MAI NTAINED HAD MET WITH DEPARTMENTAL ACCEPTANCE AND APPROVAL IN THE E ARLIER YEARS. ONLY IF THERE WAS SOME SPECIFIC DEFICIENCY OR DEFECT WI TH THE ACCOUNTS FOR THE YEAR OF A SERIOUS NATURE, THE A.O. COULD HAVE TAKEN LEAVE OF THE PREVIOUS HISTORY OF THE CASE. NO SUCH DEFECT OR DE FICIENCY OR ANY SIGNIFICANT NATURE OR ADVERSE CHARACTER HAS BEEN B ROUGHT ON RECORD BY THE A.O. RATHER THE BOOKS OF ACCOUNT ARE AUDITED A ND THAT TOO BY AN EXPERT IN SUCH AREA AND AS CERTIFIED THE ACCOUNTS AS TRUE AND CORRECT WHICH REPORT COULD NOT HAVE BEEN IGNORED. ALSO THE PRE-EMINENT FACT THAT OVERALL RESULTS FOR THE YEAR ARE MOST FAVOURA BLE COMPARABLE TO THAT OF THE PREVIOUS YEARS HAS ALSO BEEN IGNORED. ALL THIS WAS DONE BECAUSE THE A.O. WAS UNDER THE PRE-CONCEIVED BENT OF MIND THAT A 10% RATE WAS REQUIRED TO BE APPLIED SOME-HOW IN TE RMS OF THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COUR T IN THE CASE OF SHIVAM CONSTRUCTION CO. 16. IT IS ALSO TO BE NOTED THAT THE A.O. HERSELF D ID NOT KNOW OF THE NATURE AND CONTENTS OF THE RULE ENUNCIATED BY THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF SHIVAM CONSTRUCT ION CO. PERHAPS SHE HAD COME TO KNOW ONLY VAGUELY THAT A 10% RATE WAS APPROVED IN THAT CASE. DESPITE SPECIFIC REQUEST MADE TO THE A. O. BY THE ASSESSEE IN WRITING SEVERAL TIMES THE A.O. WAS UNABLE TO PROVI DE A COPY OF THE HON'BLE HIGH COURT ORDER IN THE CASE OF SHIVAM CON STRUCTION CO. BECAUSE SHE HERSELF DID NOT HAVE ANY. SHE HAD THUS NOT APPRAISED HERSELF OF THE TRUE NATURE OF THE FACTS OF THAT CA SE AND SIMILARITY OR OTHERWISE WITH THE FACTS OF THE APPELLANT. MULTIPL E REQUESTS FOR PROVIDING A COPY OF THE CITED HIGH COURT JUDGMENT TO THE APPELLANT REMAINED UN-COMPLIED WITH BY THE A.O. NATURALLY IN SUCH CIRCUMSTANCES IT WAS NOT OPEN TO THE A.O. TO GO BY THE 10% RATE AS CITED BY HER WITHOUT PROVIDING COPY OF THE ORDER T O THE APPELLANT FOR PERUSAL AND COMMENTS. AT THE THRESHOLD ITSELF SUCH RATE APPLICATION FALLS FLAT ON ITS FACE. 17. BE AS IT MAY, THE A.O. DID PROVIDE A COPY OF THE TRIBUNALS ORDER IN THE CASE OF SHIVAM CONSTRUCTIO N CO. THE SAME IS ANNEXED TO THIS SUBMISSION. A PERUSAL OF THE SAME BY YOUR HONOUR WOULD REVEAL THAT IN THAT CASE THE ASSESSEE, THOUG H WAS A CIVIL CONTRACTOR, YET THE NATURE OF THE CIVIL CONTRACT W AS NOT STATED. IT IS NOT 11 KNOWN WHETHER THE PARTY WAS CONSTRUCTING HOUSES OR DAMS OR BRIDGES OR CULVERTS OR ROADS OR WHAT NOT. WAS IT A CASE OF A PERSON ENGAGED IN THE BUSINESS OF LAYING ROADS? THERE IS NO ANSWER T O THIS QUESTION. MORE SPECIFICALLY IT IS STATED THAT IN THE BUSINES S OF LAYING ROADS THERE IS EXTREME COMPETITION. EVEN AFTER THE TENDERS ARE SUBMITTED AND ACCEPTED ADDITIONAL DISCOUNTS AND REBATES ARE REQU IRED TO BE GIVEN OVER AND ABOVE THE STATED RATES IN ORDER TO CLENCH THE CONTRACT. THIS ASPECT OF THE MATTER HAS BEEN COMPLETELY IGNORED B Y THE A.O. FURTHER, DIFFERENT CIVIL CONTRACTS FETCH DIFFERENT PROFIT M ARGINS. UNLESS, OF COURSE, SHIVAM CONSTRUCTION CO. WAS SHOWN TO BE EX CLUSIVELY IN THE BUSINESS OF ROAD LAYING ITS RESULTS COULD NOT BECO ME THE SIN QUA NON FOR CIVIL CONTRACTS IN GENERAL. 18. REVERTING TO THE FACTS OF THE CASE OF SHIVAM CONSTRUCTION CO. AS NARRATED IN THE TRIBUNALS ORDER IT IS REQU IRED TO BE NOTICED THAT THE CITED PARTY DID NOT EVEN MAINTAIN THE BOO KS OF ACCOUNT AND PERHAPS IT HAD A TURNOVER OF A LITTLE OVER RS. 40 LAKHS. IT ITSELF ESTIMATED ITS PROFIT AT 10% FOR THE RETURN OF INCO ME. IT CHARGED 90% OF THE RECEIPTS TO EXPENSES. IT CLAIMED FURTHER DEDUC TION FOR DEPRECIATION AND INTEREST ON BORROWED MONEY. IN SUCH CIRCUMSTAN CES THE TRIBUNAL NOTICED THAT IN THE CASE OF THE ASSESSEE ITSELF IN THE PRECEDING YEARS, IN THE SCRUTINY ASSESSMENTS A 10% RATE HAD BEEN APPLI ED. IN CONFORMITY WITH THE HISTORY OF THE CASE THE TRIBUNAL DELETED 12% RATE APPLICATION OF THE REVENUE AUTHORITIES AND PROVIDED RELIEF TO THAT ASSESSEE WITH A 10% RATE DETERMINE HIM CONSISTENT OF THE PAST HIST ORY OF THE CASE. 19. THE FACTS IN THE SAID CASE CLEARLY SHOW THAT T HERE COULD NOT HAVE BEEN A DIRECTIVE BY THE HON'BLE HIGH COURT FOR A 1 0% RATE APPLICATION. IT IS APPARENTLY A CASE WHERE THE DEPARTMENT WOULD HAVE GONE TO THE HON'BLE HIGH COURT IN RESPECT OF THE ASSESSEES CA SES PLEADING FOR A 2% RATE ENHANCEMENT. WHEN SO APPROACHED THE HON'BL E HIGH COURT CONFIRMED THE 10% RATE CHOSEN BY THE TRIBUNAL. IN SUCH CIRCUMSTANCES IT WOULD BE BLATANTLY ERRONEOUS TO C ONTEND THAT THE HON'BLE HIGH COURT HAD APPLIED A 10% RATE FOR THE SEVERAL CONTRACTS OF SHIVAM CONSTRUCTION CO. THE FACT OF MATTER IS T HAT SHIVAM CONSTRUCTION CO. HAD ITSELF OFFERED 10% RETURN ON GROSS RECEIPTS WHICH RATE CAME TO BE CONFIRMED BY THE HON'BLE HIG H COURT. IN THIS CASE THE ASSESSEE SHIVAM CONSTRUCTION CO. WAS TH E VICTOR. POSSIBLY DUE TO THE NON-AVAILABILITY OF THE HON'BLE HIGH CO URT JUDGMENT THE 12 A.O. COULD NOT FATHOM THIS FACET OF THE MATTER AND SO THE ERRONEOUS OBSERVATIONS ENSUED IN THE IMPUGNED ASSESSMENT ORD ER. 20. THE SEVERAL CITATIONS AS PRESSED BEFORE THE A. O. FOR PERUSAL AND SUPPORT ARE MENTIONED AT PAGE 9 OF THE ASSESSMENT ORDER. ALL OF THEM ARE ON THE SIMPLE POINT THAT WHERE BOOKS OF ACCOUN T ARE AVAILABLE, THE RESULTS ARE TO BE TAKEN AS PER THOSE BOOKS IF THEY ARE FREE OF ANY SERIOUS DISCREPANCY. IN THE SUBJECT CASE NO DISCRE PANCY OF ANY CONSEQUENCE OR SIGNIFICANCE HAVING BEEN POINTED OU T BY THE A.O., ALL THOSE CASES APPLY TO THE FACTS OF THE SUBJECT CASE . APPARENTLY, THEREFORE, THE A.O. HERSELF HAS NOT STATED ANY PLA USIBLE REASON FOR NOT FOLLOWING ALL OR ANY OF THEM. 21. AS TO THE SEVERAL CASES CITED BY THE A.O. IN T HE ORDER, IT MAY PLEASE BE NOTED THAT THEY ARE ALL BASED ON THE DEC ISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SHIVAM CONSTRUCTION CO. IN THE FOREGOING SUBMISSIONS IT HAS ALREADY BE EN POINTED OUT THAT THE FACTS OF THE CASE OF SHIVAM CONSTRUCTION CO. A RE TOTALLY DIFFERENT AS COMPARED TO THE FACT OF THE SUBJECT OF THE CASE AND, THEREFORE, THAT CITATION HAS NO BEARING ON THE RESULTS OF THE SUBJ ECT CASE. FURTHER, THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COUR T IN CIT V. PRABHAT KUMAR(2010) 323 ITR 675 AS CITED BY THE A. O. IS ALSO INAPPLICABLE AS IT DOES NOT PROPOUND ANY SPECIFIC PROPOSITION OF LAW AND MERELY CONTENDS ITSELF BY RULING THAT THERE IS NO SUBSTANTIAL QUESTION OF LAW. OBVIOUSLY, REST IS LEFT TO THE FA CTS AS THEY ARE. 22. IN SUM, THERE IS NOTHING WRONG WITH THE SYSTEM OF ACCOUNTING PURSUED BY THE APPELLANT. THE SYSTEM IS THE SAME A S WAS IN THE PRECEDING YEARS. THE NATURE OF WORK DONE IS ALSO T HE SAME. THE NET RATE EARNED FROM THE WORK IS SIMILAR TO AT 2007-08 AND OTHER YEARS WHERE THE RESULTS WERE ACCEPTED. THERE IS NOTHING WRONG WITH THE WAGES ACCOUNT OR THE PURCHASE ACCOUNT OR IN RESPEC T OF ANY OTHER ACCOUNT. NO SPECIFIC DISCREPANCY OR DEFICIENCY HAS BEEN POINTED OUT BY THE AO WITH THE ACCOUNTS. THE WAGES TO RECEIPTS RATIO ON A PROPER COMPUTATION COMPARES VERY FAVOURABLY WITH THE ACC EPTED HISTORY OF THE CASE. THE AO HAD WRONGLY COMPUTED THE RATIO. THE MARGIN ENNURING TO THE APPELLANT IS BOTH CRITICAL AND SHO RT BECAUSE OF ACUTE COMPETITION FOR WHICH THERE IS DIRECT AND IRREFUTA BALE EVIDENCE IN THE FORM OF REBATES ON THE TOTAL CONTRACT RECEIPTS. T HE AO HAD DECIDED TO REJECT THE BOOKS OF ACCOUNT AND ADOPTED 10% RATE F OR ASSESSMENT 13 WITHOUT PROPER APPLICATION OF MIND AND EVEN WITHOU T PURSUING THE RECORDS. THE 10% RATE AS CONJURED BY THE AO IS INA PPLICABLE TO THE FACT OF THE SUBJECT CASE. THERE IS NO MANDATE OF T HE HONBLE PUNJAB & HARYANA HIGH COURT TO COMPUTE 10% RETURN ON EVERY CIVIL CONTRACT. THIS IS THE AOS MIS-IMPRESSION WHICH PERHAPS AROS E BECAUSE THE AO HAD NOT EVEN SEEN THE CITED ORDER BECAUSE IT WAS N OT WITH HER. THE BOOKS OF ACCOUNT ARE CORRECT AND COMPLETE WITHOUT ANY BLEMISH. THE AUDITORS HAVE ENDORSED THE SAME AS TRUE AND CORREC T AND CERTIFIED THEM AS BEREFT OF ANY MATERIAL DEFICIENCY OR OTHER DEFAULTS. THE BOOKS COMMEND THEMSELVES FOR READY ACCEPTANCE AND ALSO T HE PROFITS REFLECTED BY THEM. 5. THE LD. CIT(A) FORWARDED THE SAID SUBMISSIONS TO THE ASSESSING OFFICER, WHO SUBMITTED THE REPORT DATED 07.05.2012 AND THERE WAS A REBUTTAL DATED 17.7.2012 BY THE ASSESSEE. ON THE SUPPLEMENTA RY REPORT OF THE AO IN THE REMAND AND ASSESSEES REBUTTAL DATED 1.12.2012 TO THE SAID REPORT AND THE REJOINDER, THE LD. CIT(A) FINALLY CONFIRMED THE ACT ION OF THE A.O. FOR REJECTING THE BOOKS OF ACCOUNT AND APPLIED NET PROF IT RATE OF 8% WITHOUT ALLOWING DEPRECIATION VIDE PARA 7 & 8 OF HIS ORDE R. 6. THE LD. COUNSEL FOR THE ASSESSEE, MR. ASHWANI KA LIA, CA MADE HIS ARGUMENTS ON THE SAME LINES AS THE VARIOUS SUBMISS IONS MADE BEFORE THE LD. CIT(A), IN PARTICULAR, AS SUBMITTED HEREINABOVE. HE ARGUED THAT THE ASSESSEE HAD SUBMITTED ALL THE WAGES REGISTER AND RECEIPTS O F THE HEADMAN WHO IS GROUP LEADER FOR THE WAGES RECEIVED ON BEHALF OF TH E LABOURERS UNDER HIM AND THERE IS NO DISPUTE TO THE FACT. THEREFORE, THE BOO KS OF ACCOUNT CANNOT BE 14 REJECTED ON THIS ACCOUNT. AS REGARDS THE STOCK REGI STER NOT MAINTAINED FOR SAND, SOIL, BAJRI, CEMENT, BITUMEN, BRICKS ETC. IT WAS ARGUED THAT THESE ARE LOW COSTS ITEMS AND THEY HAVE BEEN CONSUMED AS AND WHEN THEY ARE RECEIVED AND STRICT VIGIL AND ACCOUNTING IS MAINTAINED I.E. WHEN EVER THEY ARE RECEIVED AT THE SITE, THE SAME ARE ISSUED AND ARE CONSUMED. THE REFORE, BOOKS OF ACCOUNT CAN ALSO NOT BE REJECTED ON THIS ACCOUNT. THE LD. CIT(A) AND THE A.O. ULTIMATELY WAS HAVING TWO OBJECTIONS I.E. WITH REG ARD TO THE WAGES REGISTER AND THE OTHER ON ACCOUNT OF STOCK REGISTER WHICH, IN FACT, HAS BEEN EXPLAINED TO THE LD. CIT(A) AND THE A.O. AS WELL AND SUBMITTE D TO THE BENCH THAT THE WAGES REGISTERS HAVE BEEN MAINTAINED AND NO DEFECT HAS BEEN POINTED OUT AND STOCK SO PURCHASED ON ACCOUNT OF VARIOUS ITEMS MENTIONED ARE CONSUMED AS AND WHEN PURCHASED. 6.1. IT WAS ALSO ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE CASES RELIED UPON IN PARTICULAR, THE CASE RELIED UPON IN THE CASE OF SHIVAM CONSTRUCTION CO. VS. CIT IN ITA NO.167/2007 (P&H) W AS NOT AT ALL APPLICABLE IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE HAS DEMANDED COPY OF THE SAID ORDER FROM THE A.O. W HICH WAS NOT SUPPLIED AND HOW THE CASES BEING RELIED UPON ARE APPLICABLE IN THE FACTS AND CIRCUMSTANCES HAVE NOT BEEN REPLIED TO BY THE A.O. THE ASSESSEE HAS DISTINGUISHED THE DECISION OF SHIVAM CONSTRUCTION C O. VS. CIT (SUPRA) AND 15 COPY OF THE ITAT ORDER SUBMITTED BEFORE THE LD. CIT (A) DISTINGUISHING WITH THE FACTS OF THE PRESENT CASE AND ALSO IT WAS EXP LAINED THAT OTHER CASES RELIED UPON BY THE AO ARE IDENTICALLY RELIED ON TH E BASIS OF SHIVAM CONSTRUCTION CO. (SUPRA) WHICH IS NOT APPLICABLE T O THE FACTS OF THE PRESENT CASE BUT THE LD. CIT(A) HAS NOT TAKEN ANY COGNIZANC E AND PROCEEDED TO APPLY NET PROFIT RATE OF 8%. 6.2. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON V ARIOUS DECISIONS OF THIS BENCH FOR ALLOWING A LESSER RATE OF INTEREST AND TO ALLOW DEPRECIATION AS CLAIMED. 7. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT ULTIMATELY AF TER POINTING OUT SO MANY MISTAKES BY THE A.O., THE AO ULTIMATELY OBSERVED TH AT THE DEFECT WAS ON ACCOUNT OF WAGES AND THAT OF THE STOCK REGISTER. AS REGARDS THE WAGES, FIRSTLY, THE ALLEGATION WAS THAT MUSTER ROLLS WERE FOUND TO BE HAVING THUMB IMPRESSION OF FEW LABOURERS. IN THIS REGARD, IT WAS SUBMITTED THAT THE ASSESSEE HAD GIVEN THE WAGES TO THE HEADMAN TO COLL ECT ON BEHALF OF GROUP OF LABOURERS. SUCH HEADMAN HAS SIGNED THE WAGES SHE ET ON BEHALF OF SUCH 16 LABOURERS. THIS FACT IS NOT IN DISPUTE.. ALSO IT IS NOT A MATTER OF DISPUTE THAT THE ASSESSEE IS HAVING THOUSANDS OF LABOURERS BUT T HE AO DIRECTED TO ENQUIRE IN THE CASE OF 42 LABOURERS AND THAT TOO IN RESPECT OF WAGES PAYABLE FOR THE MONTH OF MARCH, 2009. SEVEN OF THESE ENQUIRIES WERE NOT DISPATCHED AND 11 OF THEM WERE RETURNED BY THE POSTAL AUTHORITIES. BUT WITH RESPECT OF 24 OTHERS, THERE IS NO WHISPER OR COMMENT OF THE A.O. WHETHER THEY HAVE BEEN CONFIRMED OR NOT. THEREFORE, IN THE FACTS AND CIRCU MSTANCES OF THE CASE, IT CANNOT BE PRESUMED THAT THE WAGES FOR THE MONTH OF MARCH, 2009 WITH RESPECT TO THESE 42 PERSONS ARE BOGUS. THERE IS NO FINDING IN THIS REGARD BY THE LD. CIT(A) OR THE A.O. AS REGARDS THE PERCENTA GE OF WAGES TO THE GROSS RECEIPTS DURING THE YEAR, WHICH IS 25.26% AS AGAINS T 26.67% IN THE PRECEDING YEAR WHICH IS LESSER CANNOT BE MADE UNFORESEEN. MO REOVER, IT ALSO NOT UNDER DISPUTE AND WHICH IS ALSO PART OF RECORD THAT WAGES PAYABLE FOR THE MONTH OF MARCH, 2009 HAVE BEEN PAID TILL JULY, 2009 I.E. SOM E WAGES HAVE BEEN PAID IN THE MONTHS OF APRIL, MAY, JUNE AND BALANCE IN JU LY, 2009. NOTHING HAS BEEN BROUGHT ON RECORD THAT THE SAID WAGES PAYABLE IN THE MONTH OF MARCH, 2009 ARE BOGUS OR HAVE BEEN PAID IN THE FOLLOWING Y EAR TO SOME BOGUS PERSONS. WITH OUR THESE FINDINGS HEREINABOVE, IT AP PEARS THAT THE AO HAS ACCEPTED THE WAGES UPTO THE MONTH OF FEBRUARY, 2009 AND IT IS ONLY WITH RESPECT TO THE WAGES FOR THE MONTH OF MARCH, 2009 H E HAD A DOUBT BUT AT THE 17 SAME TIME AS PER FINDINGS OF THE LD. CIT(A) AND THE AO THESE WAGES HAVE BEEN PAID UP TO JULY, 2009 I.E. IN THE FOLLOWING YE AR. IN THE ABSENCE OF ANY WAGES PAID OR PAYABLE DURING THE YEAR TO BE BOGUS, THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. 9. AS REGARDS THE NON MAINTENANCE OF STOCK REGISTER WITH REGARD TO THE SAND, SOIL, BAJRI, CEMENT, CRUSHER ETC. AS MENTIONE D HEREINABOVE, IT WAS ARGUED THAT THESE ITEMS ARE CONSUMED WHENEVER THESE ARE PURCHASED. WE ARE OF THE VIEW THAT IN THE ABSENCE OF ANY STOCK REGIST ER OF THESE ITMES WHICH CONTRIBUTE TO A GREAT EXTENT TO THE EXPENDITURE CLA IMED BY THE ASSESSEE DO NOT HAVE ANY EVIDENTIARY VALUE OR COGENT EXPLANATION W ITH REGARD TO SUCH CONSUMPTION THOUGH THE ASSESSEE HAS SUBMITTED THE ADDRESSES OF ALL THE SUPPLIERS TO VERIFY THE GENUINENESS OF THE PURCHASE S OF THESE ITEMS MADE BUT THE AO DUE TO PAUCITY OF TIME DID NOT VERIFY THE SA ME. THEREFORE, THE PURCHASES HAVE BEEN HELD TO BE GENUINE. THE ONLY QU ESTION IS THAT THE AO HAS DOUBTED THE CONSUMPTION OF SUCH MATERIAL. NOW THE QUESTION ARISES WHETHER THERE CAN BE ANY POSSIBILITY OF LEAKAGE/PIL FERAGE OF SUCH ITEMS. IN THE FACTS AND CIRCUMSTANCES, WE FIND THAT IN THE AB SENCE OF PROPER RECORD MAINTAINED OR IN THE ABSENCE OF CALCULATION OF CONS UMPTION PRESENTED BEFORE THE AUTHORITIES BELOW OR BEFORE US OF SUCH MATERIAL , BOOKS OF ACCOUNT CANNOT BE TREATED AS COMPLETE AND ACCURATE AND THEREFORE, WE FIND NO INFIRMITY IN 18 THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY INVOKE D THE PROVISIONS OF SECTION 145(3) OF THE ACT. 10. AS REGARDS THE ESTIMATION OF INCOME, FIRST OF A LL, WHEN WE ESTIMATE THE INCOME, WE HAVE TO SEE TO THE FACTS AND CIRCUMSTANC ES OF THE PRESENT CASE OF THE IMPUGNED YEAR BEFORE GOING INTO PAST HISTORY OF THE ASSESSEE OR COMPARABLE CASES. EVEN IF THE BOOKS OF ACCOUNT HAV E BEEN REJECTED, NO SUCH ARGUMENT CAN BE ACCEPTED THAT THE AO CANNOT SEE BOO KS OF THE IMPUGNED YEAR AND THE AO STRAIGHTWAY HAS TO JUMP TO THE RESU LTS OF THE PRECEDING YEAR OF THE ASSESSEE OR COMPARABLE CASES. FIRST OF ALL, IN THE PRESENT CASE, WE HAVE TO SEE THE FACTS AND CIRCUMSTANCES OF THE PRESENT C ASE WHILE ESTIMATING THE INCOME EVEN IF THE BOOKS OF ACCOUNT HAVE BEEN REJEC TED AND IN SUCH CIRCUMSTANCES THE BOOKS SO REJECTED CANNOT BE COMP LETELY AVOIDED SINCE ESTIMATION OF INCOME HAS TO BE DONE IN THE FACTS AN D CIRCUMSTANCES OF THE IMPUGNED YEAR AND NOT OF THE PRECEDING YEAR OR OF C OMPARABLE CASES. IF IT IS NOT POSSIBLE TO ESTIMATE INCOME OF THE IMPUGNED YEA R THEN IF THE FACTS OF THE PRESENT YEAR ARE IDENTICAL TO THE FACTS OF THE PREC EDING YEAR AND SUCH IDENTICAL FACTS HAVE BEEN BROUGHT ON RECORD EITHER BY THE ASS ESSEE OR AUTHORITIES BELOW THEN THE PAST RESULTS HAS TO BE CONSIDERED. IF THIS IS ALSO NOT POSSIBLE THEN COMPARABLE CASES HAVE TO BE CONSIDERED FOR WHICH TH ERE SHOULD BE IDENTICAL FACTS ON RECORD WITH THE PRESENT CASE. 19 11. ACCORDINGLY, WITH OUR OBSERVATIONS HEREINABOVE AND LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WHILE REJECTING THE BOOKS OF ACCOUNT, WE HAVE GIVEN OUR FINDINGS WITH REGARD TO THE NON-MAINTENANCE OF THE WAGES REGISTER AND IT WAS HELD THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE INVOCATION OF PROVISIONS OF SECTION 145(3) WITH REGARD TO THE MAINTENANCE OF WAGES REGISTER FOR THE REASONS MENTI ONED HEREINABOVE. 12. AS REGARDS THE MAINTENANCE OF STOCK REGISTER WI TH REGARD TO SAND, SOIL, CEMENT, CRUSHER ETC. IN VIEW OF OUR FINDING HEREIN ABOVE, THERE IS NO ALLEGATION AS TO THAT THE ASSESSEE HAS MADE BOGUS P URCHASES OR HAS DEBITED BOGUS EXPENDITURE. IT IS ONLY A QUESTION WHETHER TH E SAME HAS BEEN CONSUMED OR NOT. IF THE SAME HAS NOT BEEN CONSUMED , THE SAME MUST BE LYING AS THE CLOSING STOCK. IF THE CLOSING STOCK IS AVAILABLE WITH THE ASSESSEE, WHICH IS THE PART OF THE PROFIT & LOSS ACCOUNT AND ALSO THERE IS OPENING STOCK DECLARED IN THE PROFIT & LOSS ACCOUNT. B UT THE ACCURACY OF THE SAME CANNOT BE VERIFIED. ACCORDINGLY, WE FIND T HERE IS EVERY POSSIBILITY OF LEAKAGE OF REVENUE. THE ASSESSEE HAS DECLARED N ET PROFIT RATE OF 4.42% ON THE GROSS RECEIPTS OF RS.23,09,62,133/- AND TO C OVER UP POSSIBLE LEAKAGE, WE ESTIMATE NET PROFIT RATE AT 5% OF THE GROSS RECE IPTS AS MENTIONED HEREINABOVE AND DIRECT THE A.O. TO ALLOW DEPRECIATI ON AS PER LAW SUBJECT TO THE INCOME DOES NOT GO DOWN BELOW THE RETURNED INC OME. WE ORDER 20 ACCORDINGLY. THUS, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.328(ASR)/2013 IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IN ITA NO.483(ASR)/2013 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26TH AUGUST, 2013. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26TH AUGUST, 2013 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. SATISH AGGARWAL & CO. AMRITSAR. 2. THE DCIT, CIRCLE-V, ASR. 3. THE CIT(A), ASR. 4. THE CIT, ASR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.