ACIT, JHUNJHUNU V. PARUL CONSTRUCTION COMPANY, JHUNJHUNU

ITA 340/JPR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1796 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 07-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K L MULCHANDANI
• Assessee Lawyers: R A VERMA CIT DHK
• Keywords: Rejection of books of accounts; Depreciation; Opportunity of being heard
• Section: 142(1); 145

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH HKKXPUN] YS[KK LNL; ,OA JH DQY HKKJR] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 276/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13. M/S PARUL CONSTRUCTION COMPANY V. & P.O., KODESAR, JHUNJHUNU. CUKE VS. ACIT, JHUNJHUNU CIRLCE-JHUNJHUNU. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACFP 3708 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 340/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13. ACIT, JHUNJHUNU CIRLCE-JHUNJHUNU. CUKE VS. M/S PARUL CONSTRUCTION COMPANY V. & P.O., KODESAR, JHUNJHUNU. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACFP 3708 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI K.L MULCHANDANI (C.A.) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI R.A. VERMA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 26.12.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 28.12.2017 VKNS'K@ ORDER PER BENCH THESE CROSS APPEALS FILED BY THE ASSESSEE AND THE R EVENUE ARE DIRECTED AGAINST THE ORDER OF LD. CIT (A)-III, JAIPUR DATED 07/01/2016 PERTAINING TO A.Y. 2012-13. THE GROUNDS OF ASSESSEES APPEAL ARE READS AS UNDER :- 1. UNDER THE FACTS AND CIRCUMSTANCES, THE HONBLE CIT(A) HAS CONFIRMED THE ADDITION ON ESTIMATION BASIS WITHOUT GIVING ANY JUSTIFICATION, 2 ITA NO. 276 & 340/JP/2016. M/S PARUL CONSTRUCTION COMPANY. REASONABLENESS AND PAST HISTORY OF THE CASE. THE C IT(A) HAS WRONGLY DISALLOWED CONTRACT EXPENSES A SUM OF RS. 10,00,000 .00 2. UNDER THE FACTS AND CIRCUMSTANCES, THE HONBLE C IT(A) HAS LEGALLY AND FACTUALLY ERRED BY CONFIRMING DISALLOWANCE ON INTER EST PAID TO VARIOUS FINANCIAL INSTITUTIONS A SUM OF RS. 18,61,501.00 PA ID BY THE ASSESSEE ON VARIOUS LOAN TAKEN ON PLANT AND MACHINERY ETC. WITH OUT APPRECIATING FACTS OF THE CASE. 3. THE ASSESSEE MAY CRAVE TO AMEND, ALTER, MODIFY O R RAISE ANY OTHER GROUND OF APPEAL. THE GROUNDS OF REVENUES APPEAL ARE READS AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE CIT(A) HAS ERRED IN ALLOWING RELIEF OF RS. 71,56,760/- IN RESPECT OF DISALLOWANCE OF CONTRACT EXPENSES DESPITE LOW NET P ROFIT DECLARED FROM CONTRACT RECEIPTS AND NOT FURNISHING OF REQUIRED DE TAILS AND EVIDENCE BY THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT OF RS. 71,56,760/- EVEN THOUGH SHE HAS CONFIRMED THE ACTIO N OF INVOCATION OF SECTION 145(3) OF THE IT ACT, 1961. 2. THE ASSESSEE IS A CIVIL CONTRACTOR. THE ASSESSI NG OFFICER REJECTING THE BOOKS OF ACCOUNT BY INVOKING THE PROVISION OF SECTION 145 (3) OF THE INCOME TAX ACT, 1961. THE CONTRACT RECEIPTS FOR YEAR UNDER CONSIDERATION WERE RS. 30,13,17,657/-. THE CONTRACT EXPENSES DEBITED IN PROFIT AND LOSS ACCOUN T WERE RS. 27,18,92,012/-. THUS, THE CONTRACT EXPENSES WERE 90.20% OF THE GROS S RECEIPTS. THE ASSESSING OFFICER DISALLOWED 3% OF THE CONTRACT EXPENSES AMOU NTING TO RS. 81,56,760/-. THE LD. CIT(A) GRANTED PART RELIEF TO THE ASSESSEE, AGA INST THIS, BOTH ASSESSEE AS WELL AS REVENUE ARE IN APPEAL BEFORE ITAT. 3 ITA NO. 276 & 340/JP/2016. M/S PARUL CONSTRUCTION COMPANY. 3. GROUND NO. 1 OF ASSESSEES APPEAL AND GROUND NO. 1 & 2 OF REVENUES APPEAL ARE AGAINST THE PART RELIEF GRANTED BY THE L D. CIT(A) WITH REGARD TO THE ESTIMATING THE INCOME AND SUSTAINING THE LUMP-SUM A MOUNT OF RS. 10,00,000/-. 3.1 WE HAVE HEARD BOTH THE SIDES OF THIS ISSUE AND WE ARE ALSO CONSIDERING THE VARIOUS CASE LAWS RELIED UPON, THE LD. CIT(A) HAS G RANTED THE RELIEF TO THE ASSESSEE BY HOLDING AS UNDER:- 5.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT, FINDINGS OF THE A.O AS ALSO OTHER RELEVANT FACTS RELATING TO TH IS GROUND. IT MAY BE NOTED THAT THE APPELLANT HAS OBJECTED TO THE REJECTION OF BOOKS OF ACCOUNTS AND ADDITION OF RS. 81,56,760/- OUT OF CONTRACT EXPENSE S. A SPECIFIC QUERY WAS RAISED REGARDING BIFURCATING THE CONSOLIDATED AMOUN T OF CONTRACT EXPENSES AND FURNISHING OF MONTH WISE STATEMENT OF DIFFERENT HEADS IN CONTRACT EXPENSES. AS PER A.O. THE APPELLANT NEVER PRODUCED BOOKS OF ACCOUNTS AS ALSO THAT THE COMPLETE DETAILS OF CONTRACT EXPENSES VIZ A VIZ EXPENSES INCURRED UNDER DIFFERENT HEADS WAS NOT FURNISHED. THEREFORE THE A.O. CAME TO THE CONCLUSION THAT THE CONTRACT EXPENSES AMOUNTING TO RS. 30.13 CRORES APPROXIMATELY AND WHICH WERE ABOUT 90.02% OF THE TO TAL RECEIPTS WERE NOT SUBJECT TO PROPER VERIFICATION. THE A.O. ACCORDINGL Y DISALLOWED 3% OF SUCH CONTRACT RECEIPT LEADING TO ADDITION OF RS. 81,56,7 60/- ON THE OTHER HAND THE APPELLANT CASE IS THAT PROCEEDINGS WERE ATTENDED ON SPECIFIC DATES WITH REGULAR BOOKS OF ACCOUNTS AND THAT ON THOSE SPECIFI C DATES THE A.O. WAS NOT AVAILABLE. IT IS ALSO CLAIMED THAT THE APPELLANT HA S MAINTAINED CONSTANT N.P. AND G.P. RATE AND THAT EVEN WHEN THE CASE WAS COMPL ETED UNDER SCRUTINY ASSESSMENT IN THE PAST THE INCOME WAS ASSESSED @ 6 TO 7% SUBJECT TO CLAIM OF DEPRECIATION INTEREST PAYMENT AND REMUNERATION T O THE PARTNERS. IT IS ALSO CONTENDED THAT BEFORE DISALLOWING 3% OF CONTRACT EX PENSES THE A.O. HAS NOT GIVEN PROPER OPPORTUNITY OF BEING HEARD OR ANY SHOW CAUSE NOTICE. IT MAY BE NOTED THAT SUCH SPECIFIC QUERY FOR FURNISHING OF BI FURCATED ACCOUNT OF CONTRACT 4 ITA NO. 276 & 340/JP/2016. M/S PARUL CONSTRUCTION COMPANY. EXPENSES UNDER DIFFERENT HEADS WAS MADE BY THE A.O. VIDE NOTICE U/S 142(1) DATED 08.11.2014 AND WHICH WAS REPEATEDLY REQUESTED FOR ON THE SUBSEQUENT DATES OF HEARING BUT THE APPELLANT NEVER COMPLIED W ITH SUCH SPECIFIC REQUIREMENT RAISED BY THE A.O. IT MAY BE NOTED THAT IN THE CONTRACT ACCOUNT OF M/S PARUL CONSTRUCTION COMPANY THE APPELLANT HAS CLAIMED CONTRACT EXPENSES IN A CONSOLIDATED MANNER FOR RS. 30.13 CRO RE APPROXIMATELY AND FOR MAKING PROPER VERIFICATION OF SUCH EXPENSES THE A.O . HAS RIGHTLY REQUIRED THE ASSESSEE TO FURNISH BIFURCATED DETAILS OF SUCH EXPE NSES BY WAY OF EACH HEAD AS ALSO MONTH WISE EXPENSES OF EACH HEAD OF EXPENSE S. HOWEVER THE AR OF THE ASSESSEE HAS EXPRESSED HIS INABILITY TO PRODUCE BOOKS OF ACCOUNTS BEFORE THE AO. IN THIS BACKGROUND IT CAN BE SAID WITH CERT AINTY THAT THE CLAIM OF THE APPELLANT IN RESPECT OF CONTRACT EXPENSES AMOUNTING TO RS. 30.13 CRORES WAS NOT SUBJECT TO PROPER VERIFICATION AND THEREFORE TH E BOOKS OF ACCOUNTS OF THE APPELLANT CANNOT CONSIDERED TO BE CORRECT OR COMPLE TE. THEREFORE THE ACTION OF THE A.O. IN REJECTION OF BOOKS OF ACCOUNTS AND A PPLYING PROVISION OF 145(3) OF IT ACT IS CONFIRMED. AS REGARDS ESTIMATION OF PROFIT, AFTER INVOKING THE PROVISIONS OF SEC. 145(3) OF IT ACT, IT MAY BE STATED THAT IT IS A SET TLED LAW THAT EVEN AFTER INVOKING THE PROVISIONS OF SEC. 145(3), THE AO IS N OT EMPOWERED TO ASSESS THE INCOME AT WHATEVER FIGURES HE WANTS AND THE AO IS S UPPOSED TO MAKE AN HONEST ESTIMATION EITHER BASED ON THE PAST HISTORY OF THE APPELLANT'S OWN CASE OR ON THE BASIS OF ANY COMPARABLE CASE. THE PAST RE SULTS MAY ALSO INDICATE THAT THE CLAIM OF THE EXPENSES SHOULD ALSO BE BROAD LY SIMILAR TO THE PAST YEARS AND IF THERE IS WIDE VARIATIONS THEN THERE SHOULD B E SPECIFIC REASONS FOR THE SAME. FOR SUCH PROPOSITION RELIANCE IS PLACED ON TH E FOLLOWING CASE LAWS: I) M/S BRIJBHUSHAN LAI PRADHUMAN KUAMR VS. CIT, 115 IT R 524 II) SHREE SHANKAR KHANDSARI SUGAR MILLS VS. CIT, 193 I TR 669 III) CIT VS DR. A.P. BAHEL 2 DTR 387 (RAJ) IV) CIT VS. SURESH MARBLES PVT. LTD. 18 DTR 118 (RAJ) 5 ITA NO. 276 & 340/JP/2016. M/S PARUL CONSTRUCTION COMPANY. V) SHRI RAM JHANWAR VS. ITO (2005) 98 TTJ 639 (ITAT, JODHPUR) VI) AJAY GOYAL VS. ITO 99 TTJ, ITAT, JODHPUR THE MERITS OR OTHERWISE OF THE ADDITION MADE BY THE A.O. ARE TO BE DECIDED ACCORDINGLY. IT MAY BE NOTED THAT AS PER THE A.O. O N TOTAL TURNOVER OF RS. 30,13,17,657/-LACS. THE APPELLANT HAS SHOWN CONTRAC T EXPENSES AMOUNTING TO RS. 27,18,92,012/- LACS WHICH ARRIVED AT 90.02% OF TOTAL RECEIPTS. THE A.O. CONSIDERED SUCH CONTRACT EXPENSES EXCESSIVE AND DIS ALLOWED 3% OF SUCH EXPENSES LEADING TO ADDITION OF RS. 8156760/- IT MA Y BE NOTED THAT THE A.O. HAS NOT GIVEN ANY JUSTIFICATION FOR DISALLOWING 3% OF SUCH EXPENSES. IN FACT, THE A.O. HAS NOT EVEN COMPARED SUCH CONTRACT EXPENS ES INCURRED IN EARLIER YEARS AS COMPARED TO THE EXPENSES SHOWN IN THE YEAR UNDER CONSIDERATION. THE A.O. HAS ALSO NOT TRIED TO COMPARE THE G.P./N.P SHOWN BY THE APPELLANT IN EARLIER YEARS VIZ A VIZ IN THE YEAR UNDER CONSID ERATION. DURING THE APPELLATE PROCEEDINGS THE APPELLANT WAS REQUIRED TO FURNISH T HE DETAILS OF CONTRACT EXPENSES INCURRED IN EARLIER TWO YEARS AS COMPARED TO SUCH CLAIM IN THE YEAR UNDER CONSIDERATION AND THE COMPARATIVE FIGURE WAS FOUND TO BE AS UNDER: PARUL CONSTRUCTION COMPANY, JHUNJHUNU COMPARITIVE % OF CONTRACT EXPENSES FINANCIAL YEAR TURNOVER CONTRACT EXPENSES % OF CONTRACT EXPENSE AS TO TURNOVER 2008 - 09 RS. 26,58,45,224.00 RS. 238356752.00 89.65997 2009 - 10 RS. 30,62,54,769.00 RS. 275477252.00 89.95036 2010 - 11 RS. 19,27,82,615.00 RS. 17,20,95,111.00 89.26900 2011 - 12 RS. 30,13,17,657.00 RS. 27,18,92,012.00 90.02 6 ITA NO. 276 & 340/JP/2016. M/S PARUL CONSTRUCTION COMPANY. THE PERUSAL OF SUCH COMPARATIVE EXPENSES MAY INDICA TE THAT IN COMPARISON TO A.Y. 2010-11 THE PERCENTAGE OF SUCH E XPENSES AS PROPORTION TO THE TOTAL RECEIPT HAS SLIGHTLY INCREASED. HOWEVER, KEEPING IN VIEW THE FACT THAT THE BOOKS OF ACCOUNTS WERE NOT SUBJECT TO VERIFICATION AND SPECIFIC DETAILS IN RES PECT OF CONTRACT EXPENSES WERE NOT FILED MERELY BY RELYING ON PAST HISTORY, T HE ASSESSEE CANNOT BE ABSOLVED FROM THE STATUTORY DUTIES OF MAINTAINING P ROPER BOOKS OF ACCOUNTS. IT SEEMS THAT THE ASSESSEE IN THIS CASE HAS MADE A PRA CTICE OF NOT MAINTAINING / PRODUCING PROPER DETAILS TO SUPPORT THE EXPENSES CL AIMED IN CONTRACT ACCOUNT. THUS AFTER CONSIDERING THE TOTALITY OF FACTS AND CI RCUMSTANCES OF THIS CASE, LUMP SUM ADDITION OF RS. 10,00,000/- OUT OF SUCH CO NTRACT EXPENSES IS CONFIRMED. THE APPELLANT ACCORDINGLY GETS RELIEF OF RS. 7156760/-. THE GROUNDS OF APPEAL ARE PARTLY ALLOWED. THE LD. CIT(A) HAS SUSTAINED THE REJECTION OF BOOKS OF ACCOUNTS AND SUSTAINED THE DISALLOWANCE OF RS. 10 LACS OUT OF THE CONTRACT EXP ENSES. THUS, THE ASSESSEE WAS GRANTED THE RELIEF OF RS. 71,56,760/-. WE ALSO OBS ERVE THAT BOOKS OF ACCOUNTS OF THE ASSESSEE WERE NOT SUBJECT TO THE VERIFICATION WITH REFERENCE TO THE SPECIFIC DETAILS IN RESPECT OF CONTRACT EXPENSES AS SUCH DETAILS WERE N OT FILED. ASSESSEE HAS RELIED MERELY ON PAST HISTORY. THE ASSESSEE CANNOT ABSOLV E ITSELF FOR MAINTAINING PROPER BOOKS OF ACCOUNTS TO DEDUCE THE CORRECT PROFIT ON T HE CONTRACT RECEIPTS. IN ABSENCE OF FULL DETAILS, WE ARE OF THE VIEW THAT LD. CIT(A) HAS RIGHTLY SUSTAINED THE ADDITION OF RS. 10 LACS OUT OF SUCH CONTRACT EX PENSES. WE ALSO HOLD THAT LD. CIT(A) RIGHTLY ALLOWED PART RELIEF TO THE ASSESSEE. IN VIEW OF THESE FACTS, WE DISMISS THESE GROUNDS OF THE ASSESSEE AS WELL AS REVENUE ON THIS ISSUE. 7 ITA NO. 276 & 340/JP/2016. M/S PARUL CONSTRUCTION COMPANY. 4. GROUND NO. 2 OF ASSESSEES APPEAL IS RELATED TO SUSTAINING THE ADDITION OF RS. 18,61,501.00. THE ASSESSEE HAS MADE THE PAYMENT OF INTEREST ON THE SECURED LOANS OF RS. 1,67,610/- TO THE TATA CAPITAL AND RS. 16,93 ,891/- TO NBFC WITHOUT DEDUCTING TDS. THE AO HAS DISALLOWED THESE AMOUNT BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE IT ACT. THE LD. CIT(A) HA S SUSTAINED THE ADDITION BY HOLDING AS UNDER:- 6.3 I CAREFULLY CONSIDERED THE FINDINGS OF THE AO AS ALSO ARGUMENTS OF THE LD. AR OF THE APPELLANT. THE ASSESSEE CONTENDED TH AT SE. 145(3) HAS ALREADY BEEN INVOKED BY THE AO AND ESTIMATION OF INCOME HAS BEEN MADE. THEREFORE, NO FURTHER DISALLOWANCE CAN BE MADE UNDE R ANY OTHER SECTION OF THE ACT. HE CITED VARIOUS DECISIONS IN HIS FAVOUR. IN THIS CASE A DISALLOWANCE OF 3% WAS MADE OUT OF CONTRACT EXPENSES WHICH FORMED A PART OF THE TRADING ACCOUNT. THE INTEREST UNDER REFERENCE FORMS A PART OF THE P&L ACCOUNT AND IS NOT COVERED BY THE TRADING ADDITION MADE BY MAKING DISALLOWANCE. THEREFORE THE DECISIONS RELIED UPON BY THE APPELLANT ARE DIST INGUISHABLE. FURTHER THE ASSESSEE IN THE PRECEDING ASSESSMENT YEAR HAS DEDUC TED AND DEPOSITED THE TAX. THEREFORE, HE WAS AWARE OF THE RESPONSIBILITY OF MAKING DEDUCTIONS ON SUCH PAYMENTS. IN VIEW OF 40(A)(IA) TDS IS TO BE DEDUCTED BY THE A SSESSEE ON INTEREST PAYMENT FAILING WHICH THE AMOUNT OF INTEREST IN DIS ALLOWABLE. THEREFORE THE ACTION OF THE AO IN MAKING DISALLOWANCE OF THE SAME IS UPHELD. THE AR STATED THAT THE PAYEES PAID THE TAXES FOR WH ICH THE EVIDENCE IS BEING SUBMITTED. HOWEVER NO SUCH EVIDENCE WAS SUBMITTED. THEREFORE NO BENEFIT CAN BE GIVEN ON THIS GROUND ALSO. THIS GROUND IS DISMISSED. 8 ITA NO. 276 & 340/JP/2016. M/S PARUL CONSTRUCTION COMPANY. 4.1 WE HAVE HEARD BOTH THE SIDES OF THIS ISSUE. TH E LD. CIT(A) HAS SUSTAINED THE ADDITION FOR FAILURE OF ASSESSEE NOT TO SUBMIT DETA ILS/EVIDENCES IN SUPPORT OF THE CLAIM THAT PAYEE HAS PAID THE TAXES ON THESE INTERE ST. BEFORE US, ALSO NO SUCH EVIDENCE WAS REFERRED OR POINTED OUT BY LD. A/R WHI CH COULD ESTABLISH THAT PAYEE HAS PAID THE TAXES ON SUCH INTEREST. THEREFORE, IN ABSENCE OF ANY SUPPORTING DOCUMENTS, WE FIND NO FAULT IN THE ORDER OF THE LD. CIT(A), SAME IS HEREBY DISMISSED. 5. IN THE RESULT, THESE CROSS APPEALS BY THE ASSESS EE AS WELL AS REVENUE ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 28/12/2017 . SD/- SD/- ( DQY HKKJR ) ( HKKXPUN ( KUL BHARAT ) ( BHAGCHAND) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED: 28/12/2017 POOJA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S PARUL CONSTRCUTION COMPANY, JHUNJHUNU. 2. THE RESPONDENT ACIT, CIRCLE- JHUNJHUNU. 3. THE CIT. 4. THE CIT(A), 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 276 & 340/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 9 ITA NO. 276 & 340/JP/2016. M/S PARUL CONSTRUCTION COMPANY.