ITO, Barnala V. Sh. Ashok Kumar, Barnala

ITA 340/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86181 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-02-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 03-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR AMA RVEER SINGH
• Keywords: Rejection of books of accounts; Business income; Depreciation
• Section: 143(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 340/CHD/2014 ASSESSMENT YEAR: 2010-11 THE ITO, VS SHRI ASHOK KUMAR, WARD, C/O M/S A.K.BANSAL, BARNALA. OPPOSITE PRABHAT CINEMA, BARNALA. PAN: ANNPK4272G & C.O. 24/CHD/2014 IN ITA NO. 340/CHD/2014 ASSESSMENT YEAR: 2010-11 SHRI ASHOK KUMAR, VS THE ITO, C/O M/S A.K.BANSAL, WARD, OPPOSITE PRABHAT CINEMA, BARNALA. BARNALA. PAN: ANNPK4272G (APPELLANT) (RESPONDENT) DEPARTMENT BY : DR. AMARVEER SIN GH ASSESSEE BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 02.02.2015 DATE OF PRONOUNCEMENT : 06.02.2015 O R D E R PER BHAVNESH SAINI,JM THE DEPARTMENTAL APPEAL AS WELL AS CROSS OBJECTION BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. CIT( APPEALS) PATIALA DATED 31.01.2014 FOR ASSESSMENT YEAR 2010-1 1. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 3. BRIEFLY THE FACTS OF THE CASE AS EMERGING FROM T HE IMPUGNED ORDERS IS THAT THE ASSESSEE IS A CONTRACTOR. DURIN G THE 2 ASSESSMENT PROCEEDINGS, THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED UNDER SECTION 145(3) OF THE ACT AND N ET PROFIT IS ASSESSED AT 12% OF THE GROSS RECEIPTS AND INCOME WA S ACCORDINGLY COMPUTED. THE FACTS ARE DISCUSSED BY TH E ASSESSING OFFICER IN THE ASSESSMENT ORDER. IN BRIEF, THE REAS ON FOR REJECTION OF BOOKS OF ACCOUNTS IS THAT THE ASSESSEE FAILED TO VERIFY THE GENUINENESS OF OPENING AND CLOSING BALANCE OF LABOU R PAYABLE. IT APPEARS FROM ASSESSMENT ORDER THAT THE A.O. HAS ASK ED THE ASSESSEE TO SUBMIT THE DETAIL IN A PARTICULAR FASHI ON. HOWEVER, THE ASSESSEE ONLY FILED COPY OF LABOURERS IDENTIFIC ATION REGISTER. SECONDLY, THE ASSESSEE FAILED TO JUSTIFY THE QUANTI TATIVE AND QUALITATIVE DETAILS OF THE CLOSING STOCK. THIRDLY, THE ASSESSEE FAILED TO JUSTIFY THE LOAN TO ONE SMT. AMANDEEP KAU R. THE A.O. HAS ALSO SUBMITTED THAT THE ASSESSEE WAS REQUESTED TO FILE THE DETAIL OF WORK DONE ALONG WITH MATERIAL, LABOUR USE D, VERIFICATION/JUSTIFICATION OF PURCHASE, WORK DONE A ND EXPENSES OF LABOUR, BONUSES ETC. HOWEVER, THE ASSESSEE HAS TAKE N PLEA THAT THE WORKS WERE RELATED TO DEFENCE DEPTT. AND AFTER COMPLETION OF WORK, THE COPY OF WORK AGREEMENT AND OTHER DETAILS ARE KEPT BY THE DEFENCE DEPTT. THE ASSESSEE, THEREFORE, FAILED TO SUBMIT THE DOCUMENTARY EVIDENCES ASKED FOR BY THE A.O. THE A.O . HAS ALSO MENTIONED THAT WITH REGARD TO QUERY REGARDING AUDIT REPORT IN WHICH THE METHOD OF ACCOUNTING IS SHOWN AS MERCANTI LE AND CASH SYSTEM MAINTAINED IN THE ITR FILED WITH THE DE PTT. THE ASSESSEE SUBMITTED THAT FROM THE VERY BEGINNING, TH E ASSESSEE HAS TAKEN PAYMENTS OF CONTRACT ON RECEIPT BASIS. THE ASSESSEE HAS NEITHER REDUCED THE WIP FOR THE FINANCIAL YEAR 2OO8-OG NOT ADDED WIP FOR FINANCIAL YEAR 2009-10. 3 4. DURING THE APPELLATE PROCEEDINGS THE ASSESSEE SU BMITTED THAT THE REJECTION OF BOOKS OF ACCOUNTS IS INCORREC T. IT IS SUBMITTED THAT EVEN U/S 44AB WHERE THE BOOKS OF ACC OUNTS ARE NOT MAINTAINED AND GROSS RECEIPTS ARE LESS THAN RS. 1 CRORE, THE PROFIT IS TO BE CALCULATED @ OF 8%. IT IS FURTHER S UBMITTED THAT IN THE CASE OF SH. SUKHWINDER VS. THE ASSESSEE, THE HO N'BLE ITAT, CHANDIGARH VIDE ORDER DATED 24.09.2013 ACCEPTED THE BOOKS OF ACCOUNTS AND NET PROFIT 1.2% OF THE GROSS RECEIPTS DECLARED BY THE ASSESSEE. AS REGARDS, THE LABOUR EXPENSES, THE ASSESSEE SUBMITTED THAT MOST OF THEM ARE TECHNICAL LABOUR KE PT ON PERMANENT BASIS. NO LABOUR PERSON CAN ENTER INTO TH E PREMISES OF AIR-FORCE WITHOUT THEIR ENTRY IN THE AIR-FORCE R ECORD AT MAIN GUARD-ROOM. HE HAS REGULARLY FILED VAT RETURNS WITH COMPLETE DETAILS. HE SUBMITTED BILLS & VOUCHERS FOR VARIOUS EXPENSES. SMT. AMANDEEP SINGH WAS PRODUCED DURING THE ASSESSM ENT PROCEEDINGS. THE ASSESSEE SUBMITTED THAT 'IN RESPON SE THE ASSESSEE PRODUCED COMPLETE BOOKS OF ACCOUNT ALONG W ITH SALE & PURCHASE VOUCHERS, BANK STATEMENTS, LABOUR REGISTER & SUBMITTED DETAILS WHICH WERE REQUIRED BY THE INCOM E TAX OFFICER, BARNALA. THE ID. INCOME TAX OFFICER, BARNA LA ASKED THE ASSESSEE TO SUBMIT LIST OF PERSONS TO WHOM LABOUR I S PAYABLE RS.23,00,000/- ACCORDINGLY THE ASSESSEE SUBMITTED C OPY OF ACCOUNT FROM THE BOOKS OF ACCOUNTS FOR THE F.Y.2010 -11 DETAIL OF LABOUR PAID RS.23,00,000/-. THE ASSESSEE EXPLAIN ED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THEY USED . TECHNICAL LABOUR, MOSTLY THE LABOUR IS PERMANENT ON ALL THE S TATIONS. NO LABOUR PERSON CAN ENTER INTO DEFENCE LAND THE PERMI SES OF AIR FORCE WITHOUT THEIR ENTRY IN THE AIR FORCE RECORD A T MAIN 4 GUARDROOM. THE ASSESSEE MAINTAINED REGULAR BOOKS OF ACCOUNTS. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSEE EXPLAINED THAT HE IS REGISTERED UNDER THE PUNJAB VAT ACT 2005 AND FILING REGULARLY QUARTERLY VAT RETURNS ONLINE WITH THE NARRATION OF COMPLETE PURCHASE, PAYMENTS RECEIV ED, LABOUR PAID, INPUT VAT & OUTPUT VAT. THE ASSESSEE ALSO EXP LAINED THAT WITHOUT MAINTAINING REGULAR BOOKS OF ACCOUNTS QARTE RLY VAT RETURN CAN NOT BE FILLED ONLINE. THE ASSESSEE SUBMI TTED ALL THE BILL/VOUCHERS OF DIESEL, PETROL RS. 85,697/-. HIRE CHARGES RS. 49,382/-, INSURANCE RS.12,423/-, REPAIR & MAINTENAN CE RS.51,919/-& CAR ACCOUNT TO CLAIM DEPRECIATION RS.1 ,34, 647 /- THE ASSESSEE ALSO EXPLAINED THAT HE HAS TAKEN VALUE OF FOUR PLOTS IN ITS BOOKS OF ACCOUNTS INCLUDING STAMP DUTY & MISC. EXP. THE VALUE OF PLOTS MENTIONED BY THE ID. INCOME TAX OFFICER, BARNALA IS ONLY OF SALE DEAL. THE ASSESSEE PRODUCED SMT. AMANDEEP KAUR TO WHOM RS.50,000/- WAS ADVANCED. THE ASSESSEE PAID FREIGHT RS.1,43,491/- DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE EXPLAINED THAT HE PAID FREIGHT LESS THEN 20, OOO/- IN SINGLE TRANSITION & LESS THAN RS. 50,000/- IN THE YEAR TO ANY TRANSPORT. 5. THE BOOKS OF ACCOUNTS WERE DULLY AUDITED BY THE CHARTERED ACCOUNTANT VISHAV JYOTI MAHAJAN & CO. ON 16.09.2010 . INSPITE OF ALL THESE ID. INCOME TAX OFFICER, BARNALA REJECT ED THE BOOKS OF ACCOUNTS U/S 145(3) OF THE INCOME TAX 1961 AND MADE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT. 6. THE COMMENTS OF THE ASSESSING OFFICER WERE CALLE D FOR WHICH ARE REPRODUCED IN THE IMPUGNED ORDER IN WHICH THE ASSESSING OFFICER HAS RELIED UPON THE FINDINGS GIVE N IN THE 5 ASSESSMENT ORDER AND ALSO BRIEFLY EXPLAINED THAT TH E ASSESSEE COULD NOT FILE ANY PROOF OF PAYMENTS OF LABOUR PAYA BLE AND BONUS. THE ASSESSEE COULD NOT FILE THE REQUIRED DE TAILS AND REPLY REGARDING THE EXPENSES WERE ALSO NOT FILED AS PER QUERIES. THE ASSESSEE COULD NOT FILE JUSTIFICATION FOR VALUA TION OF THE CLOSING STOCK. NO EXPLANATION WAS FILED WITH DOCUM ENTARY EVIDENCE FOR ADVANCEMENT OF THE LOANS. THE ASSESSE E ALSO REITERATED THE SUBMISSIONS ALREADY MADE. 7. THE LD. CIT(APPEALS) CONSIDERING THE SUBMISSIONS OF BOTH PARTIES AND MATERIAL ON THE RECORD CONFIRMED THE RE JECTION OF THE BOOKS OF ACCOUNT, HOWEVER DIRECTED TO REDUCE THE NE T PROFIT RATE FROM 12% TO 5% AND DIRECTED THE ASSESSING OFFICER T O RECOMPUTE THE INCOME. HIS FINDINGS IN PARA 4.4 OF THE APPELLA TE ORDER ARE REPRODUCED AS UNDER : 4.4 THEREAFTER, THE A.O. IN HIS COMMENTS AGAIN RELI ED ON THE ASSESSMENT ORDER. FROM THE SUBMISSIONS OF THE APPELLANT AND THE A.O. IT IS NOTED THAT THE PRIMARY ISSUE IN THIS CASE IS VERIFICATION REGARDING THE LABOUR EXPE NSES. THE APPELLANT HAD SUBMITTED THAT THE LABOUR REGISTER HA S BEEN SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. HOWEVE R, THE A.O. CONTENDED THAT THE SAME IS NOT FURNISHED I N THE DESIRED PERFORMA. IT IS NOTED FROM THE ASSESSMENT O RDER THAT THE VOUCHERS REGARDING PAYMENT OF LABOUR HAS N OT BEEN PRODUCED BEFORE THE A.O. IN RESPECT OF OTHER E XPENSES THE APPELLANT HAS SUBMITTED THAT DETAILS ARE DULY P RODUCED DURING THE ASSESSMENT PROCEEDINGS WHICH IS NOT REBU TTED BY THE A.O. IT IS ALSO NOTED THAT THE TURN OVER AS SHOWN BY THE APPELLANT HAS BEEN ACCEPTED BY THE A.O. AND THE RE IS NO DISPUTE AS FAR AS GROSS RECEIPT IS CONCERNED. HO WEVER, ON PERUSAL OF COPY OF MUSTER ROLL AS SUBMITTED BY APPELLANT, IT IS NOTED THAT IT DOES NOT CONTAIN CON FIRMATION OF THE RECIPIENTS IN THE FORM OF SIGNATURE/THUMB IM PRESSION 6 ETC. THE A.O. HAS ALSO CONTENDED THAT THE VOUCHERS FOR LABOUR PAYMENT HAS ALSO NOT BEEN PRODUCED. THEREFOR E, THE VERACITY REGARDING THE QUANTUM OF THIS EXPENSE IS N OT CONCLUSIVELY PROVED. FURTHER, THE WORK AGREEMENTS A RE NOT PRODUCED. THEREFORE, LOOKING INTO THE FACTS OF THE CASE, I AM OF THE OPINION THAT BOOKS OF ACCOUNTS ARE CORREC TLY REJECTED BY THE A.O. U/S 145(3) OF THE ITACT'61 HOWEVER, AS REGARDS THE ESTIMATION OF PROFIT AFTER REJECTION OF BOOKS OF ACCOUNT, THE HON'BLE ITAT, CHANDIGARH IN THE CASE OF M/S HARBHAJAN SINGH & CO. NO.183/CHD/2O13 DATED 15.04.2013 HAS OBSERVED THAT EVEN AFTER REJECTION OF BOOKS OF ACCOUNTS PAST HIST ORY OF THE ASSESSEE IS THE BEST GUIDE OF ASCERTAIN AND DETERMINE THE TRADING RESULTS OF PARTICULAR YEAR. T HUS, EVEN AFTER REJECTION OF BOOKS OF ACCOUNT, THE PAST HISTORY OF THE ASSESSEE HAS TO BE APPLIED AND ADOPTED FOR T HE PURPOSE OF ESTIMATION OF PROFIT. THE APPELLANT HAS SUBMITTED THAT IN HIS CASE IN ASSESSMENT YEAR 2005- 06, THE ASSESSMENT IS COMPLETED UNDER SCRUTINY AND NET PROFIT AT 2.84% IS ESTIMATED BY THE A.O. AGAINST TH E NET PROFIT DECLARED AT 2.61% ON TURN OVER OF RS1,07,15, 819/-. AS PER SUBMISSION MADE, DURING THE THE A.Y. 2005-06 , THE CLAIM ON ACCOUNT OF LABOUR PAYMENT IS RS.63,86,315/- AND LABOUR PAYABLE IS SHOWN AT RS.6,OO,OOO/-. IN THIS YEAR I.E. A.Y.2O1O-H TURN OV ER IS RS.2,24,73,965/- AND THE NET PROFIT SHOWN BY THE APPELLANT IS 2.19%. THE CLAIM OF LABOUR EXPENSES AS MENTIONED BY THE A.O. IS RS.44,60,2O2/- OUT OF WHIC H RS.23,OO,OOO/~ IS SHOWN AS PAYABLE. THEREFORE, CLAI M OF LABOUR EXPENSE IS LESS IN THIS YEAR COMPARED TO A.Y . 2005-06. THEREFORE, LOOKING INTO THE ENTIRETY OF TH E FACTS OF THE CASE, I AM OF THE OPINION THAT THE NET PROFI T BE ESTIMATED AT 5% OF THE GROSS RECEIPT SHOWN BY THE APPELLANT. THUS, THE NP IS INCREASED BY 2.81% OVER AND ABOVE THE NET PROFIT DECLARED BY THE APPELLANT. THE A.O. IS DIRECTED TO GIVE EFFECT ACCORDINGLY. THUS, GROUN D NO.1 TO 5 IS PARTLY ALLOWED. 8. THE REVENUE IS IN APPEAL CHALLENGING THE REDUCT ION OF THE NET PROFIT RATE FROM 12% TO 5%. THE ASSESSEE IN TH E CROSS OBJECTION HAS CHALLENGED THE ORDER OF THE LD. CIT(A PPEALS) IN CONFIRMING THE REJECTION OF THE BOOKS OF ACCOUNT A ND APPLICATION OF NET PROFIT RATE OF 5%. 9. THE LD. DR RELIED UPON ORDERS OF THE ASSESSING O FFICER AND SUBMITTED THAT IN THE CASES OF THE CONTRACTORS, THE PROFIT RATE OF 10% TO 12% HAS BEEN APPLIED AND HAVE BEEN CONFIRMED BY THE 7 HON'BLE HIGH COURT. THE DETAILS OF SUCH CASES ARE FILED AS UNDER A) M/S PRABHAT KUMAR CONTRACTOR, SIRSA IN THIS CASE, THE HON'BLE ITAT CHANDIGARH ON SIMILA R FACTS OF NON VERIFIABLE NATURE OF LABOUR EXPENSES, UPHELD THE REJECTION OF BOOKS OF ACCOUNT AND APPLIED A NET PROFIT RATE OF 12% OF THE CONTRACT RECEIPTS. THIS HAS BEE N UPHELD BY HON'BLE PUNJAB & HARYANA HIGH COURT IN IT S JJDGMENT IN ITA NO. 293 OF 2008 DATED 14.11.2008. B) M/S SHIVAM CONSTRUCTION CO. LUDHIANA IN THIS CASE, THE HON'BLE ITAT CHANDIGARH IN ITS OR DER IN ITA NOS. 383 AND 384/CHD/2004 HAS APPLIED THE NET PROFIT RATE OF 10% ON THE GROSS RECEIPTS, SUBJECT T O NO FURTHER DEDUCTION ON ACCOUNT OF DEPRECIATION WHICH HAS BEEN FURTHER CONFIRMED BY THE HON'BLE PUNJAB & HARY ANA HIGH COURT. C) M/S ESS ESS BUILDERS PVT. LTD. IN THIS CASE ALSO, THE ITAT CHANDIGARH VIDE ITS ORD ER IN ITA NO. 707/CHD/1997 HAS ORDERED APPLICATION OF NET PROFIT RATE OF 12% TO THE CONTRACT RECEIPTS. D) M/S SURINDER PAL NAYAR, CONTRACTOR, LUDHIANA THE CHANDIGARH BENCH OF THE TRIBUNAL IN THIS CASE V IDE ITS JUDGEMENT IN ITA NO. 381/CHD/2004 HAS UPHELD TH E APPLICATION OF NET PROFIT RATE OF 12% SUBJECT TO NO FURTHER DEDUCTION ON ACCOUNT OF DEPRECIATION. 10. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND S UBMITTED THAT IT WAS A WORK ASSIGNED BY THE DEFENCE MINISTRY (AIR FORCE) THEREFORE, PERMANENT LABOUR IS TO BE APPLIED AND AL L THE DOCUMENTS THEREAFTER, ARE TAKEN AWAY BY THE DEFENCE AUTHORITY FOR THE PURPOSE OF SECRECY OF THE WORK CONDUCTED BY THE ASSESSEE. THEREFORE, IN CERTAIN ITEMS, THE COMPLETE DETAILS COULD NOT BE FILED. HE HAS SUBMITTED THAT IN THE YEAR UN DER APPEAL, 8 ASSESSEE HAS DECLARED NP RATE OF 2.19% AND IN PRECE DING ASSESSMENT YEAR NP RATE WAS 2.22% AND 3.17%, THEREF ORE, THE PROFIT RATE APPLIED BY LD. CIT(APPEALS) AT 5% IS ST ILL ON EXCESSIVE SIDE. HE HAS FILED COPIES OF UNREPORTED ORDERS OF ITAT CHANDIGARH BENCH AND AMRITSAR BENCH IN WHICH IN THE CASES OF CONTRACTORS, THE PROFIT RATE OF ABOUT 6% HAS BEEN A PPLIED. 11. WE HAVE CONSIDERED RIVAL SUBMISSIONS. THE AUTH ORITIES BELOW HAVE GIVEN THE REASONS FOR REJECTION OF THE B OOKS OF ACCOUNT. THE ASSESSEE HAS FAILED TO VERIFY THE GEN UINENESS OF THE OPENING AND CLOSING BALANCE OF LABOUR PAYABLE. THE DETAILS CALLED FOR BY THE ASSESSING OFFICER WERE NOT FURNIS HED. THE ASSESSEE FAILED TO JUSTIFY THE QUANTITATIVE AND QUA LITATIVE DETAILS OF THE CLOSING STOCK. THE QUERIES RAISED BY THE AS SESSING OFFICER WERE NOT PROPERLY ADDRESSED TO. THEREFORE, THESE WERE THE SUFFICIENT REASONS FOR REJECTION OF THE BOOKS O F ACCOUNT BY THE ASSESSING OFFICER. THE FINDINGS GIVEN BY THE A SSESSING OFFICER ARE THUS, NOT REBUTTED BY THE ASSESSEE TO T HE SATISFACTION OF THE AUTHORITIES BELOW. EVEN DURING THE COURSE OF ARGUMENTS, LD. COUNSEL FOR THE ASSESSEE COULD NOT S PECIFY AS TO WHAT IS THE ILLEGALITY IN THE ORDERS OF THE AUTHORI TIES BELOW IN REJECTING THE BOOKS OF ACCOUNT. THEREFORE, CONSIDE RING THE FINDINGS OF FACT RECORDED BY THE AUTHORITIES BELOW FOR REJECTION OF THE BOOKS OF ACCOUNT, WE DO NOT FIND ANY JUSTIFI CATION TO INTERFERE WITH THEIR ORDERS FOR REJECTION OF THE BO OKS OF ACCOUNT. THE CROSS OBJECTION OF THE ASSESSEE IS THEREFORE, L IABLE TO BE DISMISSED ON THIS GROUND. 9 12. NOW THE ISSUE LEFT FOR CONSIDERATION IS THE REA SONABLENESS OF THE PROFIT RATE APPLIED BY THE AUTHORITIES BELOW . THE ASSESSING OFFICER HAS APPLIED PROFIT RATE OF 12% FO R ESTIMATING THE INCOME OF THE ASSESSEE, HOWEVER THE HISTORY OF THE ASSESSEE SUGGESTS THAT ASSESSEE AT THE MAXIMUM HAS SHOWN NET PROFIT RATE OF 3.17%. IN CERTAIN DECISIONS OF ITAT CHANDI GARH BENCH AND AMRITSAR BENCH, THE PROFIT RATE OF 6% HAS BEEN APPLIED AS IS ARGUED BY LD. COUNSEL FOR THE ASSESSEE. HOWEVER , LD. DR HAS RELIED UPON DECISION OF CHANDIGARH BENCH IN WHICH P ROFIT RATE OF 10% TO 12% IN THE CASES OF THE CONTRACTORS HAVE BEEN APPLIED AND THE SAME HAVE BEEN CONFIRMED BY THE HIGH COURT AS WELL. THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AN D CIRCUMSTANCES, HISTORY OF THE ASSESSEE AND OBJECTIO NS RAISED BY THE ASSESSING OFFICER FOR REJECTION OF THE BOOKS OF ACCOUNT, IT WOULD BE REASONABLE AND APPROPRIATE TO APPLY PROFIT RATE OF 8% AS AGAINST 5% APPLIED BY THE LD. CIT(APPEALS) BECAU SE THE LD. CIT(APPEALS) HAS FAILED TO NOTE THAT SUBSTANTIAL DE FECTS HAVE BEEN POINTED OUT IN MAINTENANCE OF THE BOOKS OF ACC OUNT WHICH COULD NOT GIVE THE TRUE PICTURE OF THE PROFIT EARNE D BY THE ASSESSEE. THEREFORE, INSTEAD OF REDUCING THE SUBST ANTIAL PROFIT RATE IN THE FACTS AND CIRCUMSTANCES, THE LD. CIT(AP PEALS) SHOULD HAVE DECIDED THE ISSUE IN THE LIGHT OF THE FINDING OF FACT GIVEN BY THE ASSESSING OFFICER. WE, THEREFORE, CONSIDERI NG THE SUBMISSION OF BOTH THE PARTIES AND THE DECISIONS RE LIED UPON BY BOTH THE PARTIES AND CONSIDERING THE OBJECTIONS RAI SED BY THE ASSESSING OFFICER, FIND IT REASONABLE AND APPROPRIA TE TO ESTIMATE THE PROFIT IN THE CASE OF THE ASSESSEE BY APPLYING NET PROFIT RATE OF 8%. THE ORDER OF THE LD. CIT(APPEAL S) TO THAT 10 EXTENT IS, THEREFORE, MODIFIED AND WE DIRECT THE AS SESSING OFFICER TO APPLY NET PROFIT RATE OF 8% AGAINST THE RECEIPTS DISCLOSED BY THE ASSESSEE FOR THE PURPOSE OF COMPUT ING THE BUSINESS INCOME OF THE ASSESSEE. 13. IN THE RESULT, DEPARTMENTAL APPEAL IS PARTLY AL LOWED AND CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH FEBRUARY,2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 6 TH FEBRUARY,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH