Shri Lav Narang, Ujjain V. The DCIT 2(1), Ujjain

ITA 33/Ind/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7811 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-09-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 12-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S MANTRI
• Assessee Lawyers: S S DESHPANDE
• Keywords: Business income
• Section: 44AD; 143(3); 143(2); 44AB; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.33/IND/2018 ASSESSMENT YEAR: 2014-15 APPELLANT BY SHRI S.S. DESHPANDE , C A REVENUE BY SHRI S.S. MANTRI SR. , DR DATE OF HEARING 14 .01.2020 DATE OF PRONOUNCEMENT 22 .01.2020 O R D E R PER MANISH BORAD, AM. THE ABOVE CAPTIONED APPEAL FILED AT THE INSTANCE OF ASSESSEE PERTAINING TO ASSESSMENT YEAR 2014-15 IS DIRECTED A GAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS) (IN SHORT LD.CIT(A)], INDORE DATED 16.11.2017 WHICH IS ARIS ING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(IN SHOR T THE ACT) DATED 26.11.2016 FRAMED BY ACIT,2(1) UJJAIN. SHRI LAV NARANG 12, KSHAPNAK MARG, FREEGANJ, UJJAIN (MP) VS. ACIT 2(1) UJJAIN (APPELLANT) (REVENUE ) PAN NO. AAUPN6907H ITANO.33/IND/2018 SHRI LAV NARANG 2 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL; THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE A DDITION OF RS.39,86,369/- BY ASSESSING NET PROFIT @ 10% ON TOT AL TURNOVER OF RS.7,97,27,381/- AS AGAINST NET PROFIT RATE OF 5% DE CLARED BY THE ASSESSEE, WHICH IS WRONG AND BAD IN LAW AND IS LIABLE TO BE DELETED. 3. BRIEF FACTS AS CULLED OUT FROM THE RECORDS RELAT ING TO THIS ISSUE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN T HE BUSINESS OF CIVIL CONTRACTOR. INCOME OF RS.41,38,987/- DECLARED THE E-RETURN OF INCOME FILED ON 30.11.2014. CASE SELECTED FOR SCRUT INY THROUGH CASS FOLLOWED BY SERVING OF NOTICES U/S 143(2) & 14 2(1) OF THE ACT. DURING THE COURSE OF HEARING THOUGH THE ASSESSEE SU BMITTED COMPLETE DETAILS OF CONTRACTS EXECUTED AND THE RELE VANT WORK RECORDS BUT REGULAR BOOKS OF ACCOUNTS WERE NOT MAIN TAINED EVEN THOUGH THE GROSS RECEIPTS OF THE ASSESSEE WAS TO TH E TUNE OF RS.7,97,27,381/-. THUS FINANCIAL STATEMENT REMAINED UNAUDITED. LD. ASSESSING OFFICER REJECTED THE INCOMPLETE BOOK RECORDS U/S 145(3) OF THE ACT, AND ESTIMATED NET PROFIT @ 10% A S AGAINST 5% DECLARED BY ASSESSEE THEREBY ASSESSING THE INCOME A T RS.79,72,738/-. 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE TH E LD. CIT(A) BUT FAILED TO SUCCEED, AS LD. CIT(A) CONFIRMED THE ACTI ON OF THE LD. AO OBSERVING AS FOLLOWS: GROUND NO.1:- THROUGH THIS GROUND OF APPEAL THE APPELLANT HAS CHALLENGED THE ADDITION OF RS.39,86,369/- ON AC COUNT OF LOW NET PROFIT. THE APPELLANT IS NOT MAINTAINING TH E BOOKS OF ACCOUNT. THE APPELLANT IS A CIVIL CONTRACTOR AND TH E TURNOVER OF ITANO.33/IND/2018 SHRI LAV NARANG 3 THE APPELLANT IS AT RS.7,97,27,381/-. THE APPELLANT IS CONVENIENTLY IGNORING THE MAINTENANCE OF BOOKS OF A CCOUNT IN ORDER TO DECLARE THE NET PROFIT AT HIS CONVENIENCE. THE APPELLANT IS CARRYING OUT THE' CONTRACTOR BUSINESS SINCE LONG TIME. THE APPELLANT HAS NOT MAINTAINED THE BOOKS OF ACCOUNT T HEREFORE THE STATUTORY REQUIREMENT OF GETTING THE BOOKS OF ACCOU NT AUDITED WAS ALSO NOT COMPLIED. THE APPELLANT HAS ALSO NOT P REPARED. THE PROFIT AND LOSS ACCOUNT. ALL THE CONTRACTORS MORE O R LESS HAVING SUCH VOLUMINOUS BUSINESS ARE MAINTAINING THE BOOKS OF ACCOUNT THEREFORE, IT IS MANDATORY ON THE PART OF THE APPEL LANT TO MAINTAIN THE BOOKS OF ACCOUNT. THE APPELLANT HAS DE LIBERATELY NOT MAINTAINED THE BOOKS OF ACCOUNT. THE APPELLANT HAS NOT SUBMITTED THE METHOD OF ESTIMATING THE NET PROFIT @ 5% AND FILING THE RETURN OF INCOME. THE APPELLANT ADOPTED THE 5% NET PROFIT AS PER HIS CONVENIENCE WITHOUT ANY BASIS. IF IT WOULD HAD BEEN THE FIRST YEAR OF THE BUSINESS THEN THE NON-MA INTENANCE OF THE BOOKS OF ACCOUNT CAN BE JUSTIFIED, BUT IT IS A CONSISTENT FAILURE' ON THE PART OF THE APPELLANT TO MAINTAIN T HE BOOKS OF ACCOUNT. AS PER SECTION 44AB OF THE 1. T. ACT NET PROFIT OF 8% IS ADOPTED WHEN THE TURNOVER IS BELOW RS.1,00,00,000/- . BUT THE APPELLANT WAS HAVING THE TURNOVER OF MORE THAN RS.1,00,00,000/- THEREFORE, SECTION 44AD IS NOT APP LICABLE TO THE APPELLANT. SINCE, THE APPELLANT HAS CONSISTENTLY AN D DELIBERATELY DEFAULTED IN MAINTAINING THE BOOKS OF ACCOUNT, THE AO IS JUSTIFIED IN ADOPTING 10% NET PROFIT ON THE TOTAL TURNOVER. IT IS NOT THE CASE THAT THE AO HAS REJECTED THE BOO KS OF ACCOUNT AND ADOPTED NET PROFIT BUT IT IS THE CASE THAT THE APPELLANT DELIBERATELY NOT MAINTAINED THE BOOKS OF ACCOUNT IN ORDER TO SHOW LOW PROFIT. THEREFORE, THE ADDITION MADE BY TH E AO AMOUNTING TO RS.39,86,369/- IS CONFIRMED. THEREFORE , THE APPEAL ON THIS GROUND IS DISMISSED. 5. AGGRIEVED ASSESSEE IS NOW IN APPEAL BEFORE THE T RIBUNAL RAISING SOLE GROUND CHALLENGING THE FINDING OF LD. CIT(A) C ONFIRMING THE ACTION OF THE LD. AO APPLYING NET PROFIT @ 10% ON T HE TOTAL TURNOVER AS AGAINST THE NET PROFIT @ 5% DECLARED BY THE ASSE SSEE. ITANO.33/IND/2018 SHRI LAV NARANG 4 6. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBM ISSIONS MADE BEFORE THE LOWER AUTHORITIES AND LD. DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED THE FINDING OF LOWER A UTHORITIES. 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. SOLE GRIEVANCE OF THE ASSESSEE IS AGAINS T THE APPLICATION OF NET PROFIT @ 10% AS AGAINST THE 5% DECLARED BY T HE ASSESSEE. THE TOTAL TURNOVER OF THE ASSESSEE AS A CIVIL CONTRACTO R AMOUNTED TO RS.7,79,27,381/- UNDER THE YEAR UNDER APPEAL. THE G ROSS RECEIPT BEING BUSINESS RECEIPTS IS NOT IN DISPUTE BEFORE US . REGULAR BOOKS OF ACCOUNTS WERE NOT MAINTAINED. FINANCIAL STATEMEN TS ARE NOT AUDITED. BOTH THE LOWER AUTHORITIES HAD APPLIED NET PROFIT @ 10% BUT ASSESSEE HAD DECLARED NET PROFIT @ 5%. 8. PROVISIONS OF SECTION 44AD OF THE ACT RELATES TO SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS OF BUSINESS ON PRES UMPTIVE BASIS . UNDOUBTELY, THE PROVISIONS OF SECTION 44AD OF THE A CT DO NOT APPLY DIRECTLY ON THE CASE OF ASSESSEE SINCE TOTAL TURNOV ER IS EXCEEDING THE LIMIT PRESCRIBED U/S 44AB OF THE ACT. HOWEVER, IN T HE CASE OF A PERSON HAVING TURNOVER BELOW THE PRESCRIBE LIMIT U/ S 44AB OF THE ACT AND NOT MAINTAINING REGULAR BOOKS OF ACCOUNTS A ND ENGAGED IN THE ELIGIBLE BUSINESS I.E. ANY BUSINESS EXCEPT O F BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGES, REFERRED TO IN SECTION 44AE OF THE ACT, THEN IN SUCH CIRCUMSTANCES SUB-SECTION (1) OF SECTION 44AD OF THE ACT PROVIDES THAT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 28 TO 43C, IN THE CAS E OF AN ELIGIBLE ASSESSEE, WHO IS ENGAGED IN THE ELIGIBLE BUSINESS, A SUM EQUAL TO ITANO.33/IND/2018 SHRI LAV NARANG 5 EIGHT PERCENT (8%) OF THE TOTAL TURNOVER OR GROSS R ECEIPTS OF THE ASSESSEE IN THE PREVIOUS YEAR. ON ACCOUNT OF SUCH B USINESS OR, AS THE CASE MAY BE, SUM HIGHER THAN THE AFORESAID SUM CLAI MED TO HAVE BEEN EARNED BY THE ELIGIBLE ASSESSEE, SHALL BE DEEM ED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TA X UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSIONS . 9. WE, THUS, DRAWING INFERENCE FROM PROVISION OF SE CTION 44AD AND LOOKING TO THE FACT THAT ASSESSEE IS NOT ENGAGED IN BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGES AND ALSO NOT MAINTAINING REGULAR BOOKS OF ACCOUNTS, ARE OF THE CONSIDERED VI EW THAT APPLYING OF 8% OF NET PROFIT RATE ON THE UNDISPUTED TOTAL BU SINESS TURNOVER OF RS.7,97,27,381/- DISCLOSED BY THE ASSESSEE SHALL BE JUSTIFIED AND FAIR TO BOTH THE PARTIES. WE, HOWEVER, WOULD LIKE T O MAKE IT CLEAR THAT OUR THIS DECISION OF APPLYING OF 8% NET PROFIT RATE ON TOTAL TURNOVER EXCEEDING THE LIMIT PRESCRIBED U/S 44AB OF THE ACT WHERE BOOKS OF ACCOUNTS ARE NOT MAINTAINED PROPERLY SHALL NOT BE TAKEN AS BINDING PRECEDENCE FOR OTHER CASES, AS MUCH DEPE NDS ON FACTS AND CIRCUMSTANCES OF THE PARTICULAR CASE AND THUS T HE DECISION OF APPLYING NET PROFIT RATE MAY VARY FROM CASE TO CASE . ACCORDINGLY, REVENUE IS DIRECTED TO SUSTAIN THE ADDITION IN THE HANDS OF ASSESSEE ONLY TO THE EXTENT OF APPLYING NET PROFIT RATE OF 8 % ON TOTAL TURNOVER AND THUS ADDITION OF RS.23,91,821/- IS SUSTAINED. S OLE GROUND OF THE ASSESSEES APPEAL IS PARTLY ALLOWED. ITANO.33/IND/2018 SHRI LAV NARANG 6 10. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 22.01.2 020. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 22 ND JANUARY, 2020 PATEL/PS COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE