KESHAV DEV GUPTA, Jaipur V. DCIT, Jaipur

ITA 337/JPR/2013

• Counselvise Citation: 33723114 RSA 2013
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 02-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: PREM LATA
• Keywords: Rejection of books of accounts; Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JAIPUR BENCH JAIPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 337/JP/2013 (A.Y. 2008-09) KESHAV DEV GUPTA, D-12, VS. DCIT, CIRCLE -6, DEV NAGAR, TONK ROAD, JAIPUR. JAIPUR. PAN NO. AASPG 5081 F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.L. JAIN & MS. PREM LATA. DEPARTMENT BY : SHRI D.C. SHARMA - D.R. DATE OF HEARING : 22/01/2014. DATE OF PRONOUNCEMENT : 27/01/2014. O R D E R PER N.K.SAINI, A.M THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 30/01/2013 OF CIT(A)-II, JAIPUR. THE FOLLOWING GRO UNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THE AUTHORITIES BELOW HAVE ERRED IN LAW AS WELL AS ON FACTS IN INVOKING THE PROVISION OF SECTION 145(3) OF THE IT ACT 1961 AND REJECTED THE BOOKS. 2 2. THE AUTHORITIES BELOW HAVE ERRED IN LAW AS WELL AS ON FACTS IN APPLYING 8% RATE OF NET PROFIT AND THUS ESTIMATING THE NET PROFIT AT RS. 21,89,385/- IN PLACE OF RS. 18,27,147 . THE ADDITION MADE OF RS. 3,62,237 IS NOT JUSTIFIED. 2 FROM THE ABOVE GROUNDS, IT IS CLEAR THAT THE GRIEV ANCE OF THE ASSESSEE RELATES TO THE SUSTENANCE OF TRADING ADDIT ION OF RS. 3,62,237/-. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS A CONTRACTOR AND IS ENGAGED IN THE BUSINESS OF ROAD C ONSTRUCTION AND BUILDING OF VARIOUS GOVERNMENT DEPARTMENTS IN THE N AME AND STYLE OF M/S. SWASTIK CONSTRUCTIONS. THE ASSESSEE FILED HIS RETURN OF INCOME ON 28/09/2008 DECLARING TOTAL INCOME OF RS. 14,00,380/-. LATER ON, CASE WAS SELECTED FOR SCRUTINY. THE AO N OTICED THAT THE ASSESSEE HAD SHOWN NET PROFIT (NP) OF RS. 25,60,406 /- ON THE TOTAL TURNOVER OF RS. 3,65,33,036/- YIELDING NP RATE OF 7 .01%. HE FURTHER OBSERVED THAT THE ASSESSEE DID NOT MAINTAIN DAY TO DAY STOCK REGISTER, CONSUMPTION REGISTER, OPENING AND C LOSING STOCK INVENTORY AND THE COMPLETE DETAILS IN RESPECT OF PU RCHASE OF MATERIAL CLAIMED AT RS. 1,92,08,310/-. HE ALSO OBS ERVED THAT THE ASSESSEE HAD MADE MOST OF THE PAYMENTS ON SELF MADE VOUCHERS IN CASH AND NOT MAINTAINED COMPLETE DETAILS IN RESPECT OF PAYMENT OF WAGES WHICH WAS CLAIMED AT RS. 1,20,33,109/-. S O, IT WAS NOT 3 POSSIBLE TO VERIFY THE CONSUMPTION OF VARIOUS MATER IALS, INPUT OF LABOUR VIS--VIS THE WORK DONE. THEREFORE, NP DECL ARED BY THE ASSESSEE WAS NOT AMENABLE TO VERIFICATION. THE AO ASKED THE ASSESSEE TO SHOW-CAUSE AS TO WHY HIS BOOKS OF ACCOU NTS BE NOT REJECTED UNDER SECTION 145(3) OF THE I.T. ACT 1961 (HEREINAFTER REFERRED TO AS ACT, IN SHORT) AND NP RATE OF 8% B E APPLIED IN HIS CASE. THE ASSESSEE SUBMITTED AS UNDER:- THE ASSESSEE IS MAINTAINING PROPER BOOKS AND ACCO UNTS DULY SHOWN TO YOU DURING THE ASSESSMENT PROCEEDINGS. TH E ASSESSEE IS ENGAGED IN THE SAME LINE FOR THE LAST 10-15 YEARS A ND IS MAINTAINING THE BOOKS AND ACCOUNTS IN THE SAME MANNER. THE ASS ESSEE IS KEEPING VOUCHERS AND BILLS FOR THE TRANSACTIONS ENT ERED IN THE BOOKS. PROPER RECORDS FOR PAYMENT OF LABOUR CHARGE S AND MATERIAL PURCHASED IS ALSO BEING MAINTAINED BY THE ASSESSEE. IN SUCH CIRCUMSTANCES THE PROVISIONS U/S 145(3) ARE NOT APP LICABLE AND THEREFORE APPLYING THE RATE OF PROFIT IS NOT JUSTIF IABLE. THE AO DID NOT FIND MERIT IN THE SUBMISSIONS OF TH E ASSESSEE AND REJECTED THE BOOKS OF ACCOUNTS AND APPLIED THE NP RATE OF 8% SUBJECT TO ALLOWABILITY OF DEPRECIATION AND INTERES T. ACCORDINGLY, AN ADDITION OF RS. 3,62,237/- WAS MADE. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER T O THE LD. CIT(A), WHO OBSERVED THAT THE ASSESSEE HAD NOT DISP UTED THE FOLLOWING DEFECTS NOTICED BY THE AO:- 4 (I) NON-MAINTENANCE OF DAY TO DAY STOCK REGISTER, C ONSUMPTION REGISTER, OPENING AND CLOSING INVENTORY. (II) COMPLETE DETAILS IN RESPECT OF PURCHASES OF MA TERIAL OF RS. 1,92,08,310/- NOT MAINTAINED. (III) MOST OF THE PAYMENTS IN CASH BY SELF MADE VOU CHERS. (IV) DETAILS OF PAYMENTS OF WAGES OF RS. 1,20,33,10 9/- NOT MAINTAINED. (V) SITE-WISE RECORD IN RESPECT OF WORKS CARRIED OU T AT VARIOUS SITES NOT MAINTAINED. (VI) IN ABSENCE OF DETAILS NOT POSSIBLE TO VERIFY T HE CONSUMPTION OF VARIOUS MATERIAL INPUTS OF LABOUR VIS--VIS THE WORK DONE, IN OTHER WORDS NET PROFIT DECLARED BY THE ASSESSEE NOT AMENABLE TO VERIFICATION. 5. LD. CIT(A) CONFIRMED THE ACTION OF THE AO IN REJEC TING THE BOOKS OF ACCOUNTS AND UPHELD THE APPLICATION OF NP RATE OF 8% SUBJECT TO DEDUCTION OF DEPRECIATION AND INTEREST. NOW THE ASSESSEE IS IN APPEAL. 6 . LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT N O SPECIFIC DEFECT WAS POINTED OUT IN THE BOOKS OF ACCOUNTS AND NP RATE DECLARED BY THE ASSESSEE AT 7.01% ON THE TURNOVER O F RS. 3,65,33,036/- WAS JUSTIFIED CONSIDERING THE NP R ATE OF 7.59% DECLARED IN THE PRECEDING YEAR ON THE TURNOVER OF RS. 2,59,38,406/-. ALTERNATIVELY, IT WAS SUBMITTED THAT THE 5 ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CI T(A) WAS ON HIGHER SIDE. 7 . IN HIS RIVAL SUBMISSIONS, LD. D.R. SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IN THE PRESENT CASE, IT APPEARS THAT CERTAIN SHORTCOMI NGS WERE POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNTS MAIN TAINED BY THE ASSESSEE, PARTICULARLY COMPLETE DETAILS IN RESPECT OF PURCHASE OF MATERIAL AND PAYMENT OF WAGES WERE NOT FURNISHED. THEREFORE, IN OUR OPINION, THE REJECTION OF BOOKS OF ACCOUNTS BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT WAS JUSTIFI ED. IN SUCH TYPE OF CASES, WHEN BOOKS ARE REJECTED THE ONLY WAY TO W ORK OUT THE PROFIT IS APPLICATION OF NP RATE, BUT THE SAID RATE SHOULD BE APPLIED BY CONSIDERING THE PAST HISTORY OF THE ASSESSEES O WN CASE OR ANY COMPARABLE CASE FOR THE YEAR UNDER CONSIDERATION. IN THE INSTANT CASE, IT IS NOTICED THAT THE ASSESSEE DECLARED THE NET PROFIT RATE OF 7.59% IN THE PRECEDING YEAR, HOWEVER, THERE IS INCR EASE IN THE TURNOVER FOR THE YEAR UNDER CONSIDERATION WHICH INC REASED TO RS. 3,65,33,036/- AS AGAINST THE TURNOVER OF RS. 2,59, 38,406/- IN THE 6 IMMEDIATELY PRECEDING YEAR. WE, THEREFORE, TO MEET THE ENDS OF JUSTICE, ARE OF THE VIEW THAT THE NP RATE OF 7.50% WILL BE FAIR AND REASONABLE. ACCORDINGLY, WE DIRECT THE AO TO WORK OUT INCOME OF THE ASSESSEE BY APPLYING THE NP RATE OF 7.50% SUBJE CT TO DEPRECIATION AND INTEREST, WHICH HAS ALREADY BEEN A LLOWED BY HIM WHILE FRAMING THE ASSESSMENT UNDER SECTION 143(3) O F THE ACT. 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. (ORDER PRONOUNCED IN THE COURT ON 27 TH JANUARY, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27 TH JANUARY, 2014. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R BY ORDER ASSISTANT REGISTRAR, ITAT, JAIPUR.