ITO, SRIGANGANAGAR V. M/s. Kiran Construction, SRIGANGANAGAR

ITA 354/JODH/2013

• Counselvise Citation: 35423314 RSA 2013
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 28-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: NEERAJ CHAWLA
• Keywords: Depreciation
• Section: 68

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 354/JODH/2013 (A.Y. 2009-10) I.T.O. VS M/S KIRAN CONSTRUCTION WARD -2 C/O 52, MUKERJI NAGAR SRIGANGANAGAR SRIGANGANAGAR PAN NO. AAHFPK 0933 H (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NEERAJ CHAWLA, AR DEPARTMENT BY : SHRI N.A. JOSHI, DR. DATE OF HEARING : 13/03/2014. DATE OF PRONOUNCEMENT : 13/03/2014. O R D E R PER HARI OM MARATHA, J.M. : THIS APPEAL OF THE REVENUE, FOR A.Y. 2009-10, IS D IRECTED AGAINST THE ORDER OF LD. CIT(A), BIKANER, DATED 20/03/2013. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS CARRYING ON BUSINESS OF CIVIL CONSTRUCTION. FOR A. Y. 2009-10, IT FILED ITS RETURN OF INCOME [ROI] ON 26.9.2009 [ONLINE] DECLAR ING TOTAL INCOME OF RS. 37,09,120/-. IT WAS NOTICED THAT THE ASSESSEE HAS RECEIVED TOTAL 2 PAYMENTS OF RS. 7,36,13,279/- AND HAS DISCLOSED GRO SS PROFIT RATE AT 8.48% SUBJECT TO EXPENSES DEBITED TO PROFIT AND LO SS ACCOUNT. THE DETAILS OF GROSS RECEIPTS AND PROFIT BEFORE INTERES T ON CAPITAL AND DEPRECIATION IS AS UNDER: GROSS CONTRACT RECEIPTS 7,36,13,279.00 DEPRECIATION 08,10, 439.00 INTEREST ON PARTNER'S CAPITAL 12,68,931.00 NET PROFIT 37, 05,543.00 TOTAL (A+B+C) 57,84,913.00 PERCENTAGE ( 5784913 / 73613279 ) * 100 7.86% AS AGAINST THE SAME, THE A.O. HAS ADOPTED GROSS PRO FIT RATE OF 10.5% AND HAS MADE TRADING ADDITION. AGGRIEVED, THE ASSE SSEE WENT IN APPEAL AND THE LD. CIT(A) HAS ESTIMATED THE ASSESSEES TRA DING PROFIT @ 9%. THE REVENUE IS NOW AGGRIEVED. THE ASSESSEE HAS NOT FILED ANY CROSS OBJECTION OR APPEAL IN THIS REGARD. 2.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. BOTH THE PARTIES HAV E REITERATED THEIR EARLIER STAND TAKEN BEFORE THE LD. CIT(A) FOR AND A GAINST THEIR CONTENTIONS RAISED THEREIN. WE HAVE FOUND THAT IN THE IMMEDIATE PAST YEAR, THE ASSESSEE HAD DECLARED GROSS PROFIT RATE O F 9.05% ON THE TOTAL 3 TURNOVER OF RS. 270.04 LAKHS. IN THIS YEAR THE ASS ESSEES TURNOVER HAS INCREASED TO RS. 736.13 LAKHS BY 271% WHEREAS THERE WAS ONLY MARGINAL DECREASE IN THE GROSS PROFIT RATE FROM 9.05% TO 8.4 7%. IN OUR CONSIDERED OPINION, THIS MARGINAL DIFFERENCE IS QUI TE JUSTIFIED. BUT THE LD. CIT(A) HAS ALREADY ADOPTED ALMOST 9% GROSS PROF IT RATE AND THE ASSESSEE IS NOT IN APPEAL. WE DO NOT FIND ANY REAS ON TO INTERFERE IN THIS FINDING OF THE LD. CIT(A). ACCORDINGLY, GROUND NO. 1 OF REVENUES APPEAL CANNOT BE ALLOWED AND HENCE DISMISSED. 3. GROUND NO. (II) OF REVENUES APPEAL IS REGARDING DELETION OF ADDITION OF RS. 76,38,190/- MADE U/S 68 OF THE ACT. 3.1 THE A.O. HAS NOTICED THAT THE FOLLOWING CREDITS ARE RECORDED IN THE BOOKS OF ACCOUNT OF THE FIRM IN THE NAMES OF TH E PARTNERS ON DIFFERENT DATES, DETAILS OF WHICH, IS AS UNDER: SHRI AMRIT PAL SINGH RS. 9,25,000/- SHRI PRABH JEET SINGH RS. 7,75,000/- SHRI HARCHARAN SINGH RS. 11,25,000/- SHRI DALJINDER SINGH RS. 7,50,000/- SHRI RADHEY SHYAM RS. 7,51,000/- SHRI GURDEEP SINGH RS. 7,75,000/- SHRI SHUBH RAJ SINGH RS. 8,50,000/- SHRI JASWINDER SINGH RS. 7,25,000/- TOTAL RS. 58,76,000/- 4 THE A.O. ASKED THE ASSESSEE TO EXPLAIN THESE CREDIT S. NOT SATISFIED, THE A.O. HAS TREATED THESE CREDITS AS UNEXPLAINED A ND HAS ADDED THE SAME IN THE HANDS OF THE FIRM. ON THE CONTRARY, TH E LD. CIT(A) HAS DELETED THIS ADDITION OF RS. 58,76,000/- ON THE GRO UND THAT THESE AMOUNTS REPRESENT CAPITAL INVESTMENT OF THE PARTNER S. HE HAS FURTHER OBSERVED THAT SINCE ALL THE PARTNERS ARE IDENTIFIED AND THEY HAVE ACCEPTED THEIR DEPOSITS, THESE DEPOSITS CANNOT SURV IVE IN THE HANDS OF THE FIRM. FURTHER ADDITION OF RS. 13,47,188/- WAS FOUND OUTSTANDING TOWARDS LABOUR, FREIGHT PAYABLE TO CREDITORS. EVEN AFTER REJECTION OF BOOKS, THIS AMOUNT HAS ALSO BEEN ADDED IN THE FIRM S HANDS. A SUM OF RS. 1 LAKH RECORDED AS SQUARED UP AMOUNT WAS ALSO F OUND UNEXPLAINED AND THIS AMOUNT WAS ADDED IN THE HANDS OF THE FIRM. FURTHER, RS. 3,15,000/- HAS BEEN ADDED AS UNEXPLAINED UNSECURED LOAN AND DEPOSITS. ALL THESE ADDITIONS HAVE BEEN DELETED BY THE LD. CIT(A). THE REVENUE IS AGGRIEVED AND HAS RAISED GROUND NO. (II) OF THIS APPEAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAR EFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. BOTH THE PARTIES HAV E REITERATED THEIR EARLIER ARGUMENTS. IT WAS FOUND THAT IN CONTRACTORS HIP BUSINESS, PAYMENT TO LABOUR AND SUPPLIERS OF THE MATERIAL IS MADE ON WEEKLY OR FORTNIGHTLY BASIS AND MOST OF LABOUR WORK IS DONE T HROUGH UNORGANIZED 5 SECTOR. USUALLY, PART OF PURCHASE OF MATERIAL IS A LSO MADE FROM UNORGANIZED SECTION LIKE PURCHASE OF TROLLY OF MITT I, WATER TANK, BAJRI, GRIT, ETC. THE ASSESSEE HAS MADE TOTAL PURCHASES A LONGWITH LABOUR PAYMENT AT RS. 673.70 LAKHS. THE OUTSTANDING CREDI TORS ON ACCOUNT OF LABOUR, FREIGHT, MARKET PAYABLE ARE AMOUNTING TO RS . 25.89 LAKHS. OUT OF THIS AMOUNT, THE A.O. HAS MADE ADDITION OF RS. 1 3.47 LAKHS MAINLY ON ACCOUNT OF LABOUR PAYABLE, FREIGHT PAYABLE, OUTS TANDING MARKET PAYABLE, ETC. THE ASSESSEE FURNISHED DETAILS OF PA YABLES DURING THE ASSESSMENT ORDER. IN OUR CONSIDERED OPINION, THIS ADDITION OF RS. 13.47 LAKHS IS JUST 2% OF THE ENTIRE PAYMENT DURING THE Y EAR AND, THEREFORE, IS NOT JUSTIFIABLE TO BE SUSTAINED IN THE HANDS OF THE FIRM. THEREFORE, THE LD. CIT(A) HAS CORRECTLY DELETED THIS ADDITION. THE ADDITION AMOUNTING TO RS. 58.76 LAKHS ON ACCOUNT OF INTRODUC TION OF FRESH CAPITAL IS ALSO NOT FOUND JUSTIFIABLE. THERE ARE 8 PARTNERS IN THIS FIRM AND ALL OWN AGRICULTURAL LAND HAVING INCOME BETWEEN RS. 5 TO 10 LAKHS PER YEAR. THE ASSESSEE HAS FURNISHED THEIR PERSONA L CAPITAL ACCOUNT, PERSONAL BALANCE SHEET WHEREIN BALANCE WITH THE SAI D FIRM, PROOF OF AGRICULTURAL INCOME INCLUDING CROP SOLD IS CLEARLY SHOWN. PARTNERS HAVE ALSO SHOWN INTEREST IN THE CAPITAL IN THEIR RESPECT IVE INCOMES. THEREFORE, THE IDENTITY OF THE PARTNERS I.E. THE DE POSITORS, THEIR CREDIT WORTHINESS AND GENUINITY OF THE TRANSACTIONS HAS BE EN CLEARLY PROVED 6 ON RECORD. OTHERWISE ALSO, PARTNERS CAPITAL INVEST MENT CANNOT BE ADDED IN THE HANDS OF THE FIRM AND THIS IS SETTLED IN VIEW OF THE ORDER OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS . CHOTAN CONSTRUCTION COMPANY REPORTED IN [2004] 84 TTJ 693 [JODH] WHEREI N IT HAS BEEN HELD THAT WHERE IDENTITY OF PARTNER IS NOT IN DOUBT AND HE HAS ADMITTED THE IMPUGNED CASH CREDIT, THE ADDITION FOR THE SAME IN ASSESSEE FIRMS HANDS WAS NOT JUSTIFIED. FURTHER, ADDITION AMOUNTI NG TO RS. 1 LAKH, RS. 1.25 LAKHS, RS. 1.90 LAKHS OUT OF UNSECURED LOANS AND DEPOSIT HAS BEEN MADE. THE CASE OF THE ASSESSEE IS THAT THE AMOUNT OF RS. 1.90 LAKHS REPRESENTS OPENING BALANCE AND NO ADDITION U/S 68 C AN BE MADE ON THIS AMOUNT. DURING THE YEAR, THE ASSESSEE HAS RECEIVED RS. 1 LAKHS FROM SMT. MEENA KUMARI THROUGH CHEQUE AND REPAID THE SAM E THROUGH CHEQUE DURING THE YEAR. CONFIRMATION OF THE DEPOSI TOR IS ALSO FILED. PAN OF THE DEPOSITOR IS ALSO FURNISHED. THEREFORE, IN OUR CONSIDERED OPINION, THIS AMOUNT HAS BEEN CORRECTLY DELETED FRO M ASSESSEES HANDS. DURING THE YEAR, THE ASSESSEE RECEIVED RS. 1.25 LAK HS FROM SHRI GURDASS SINGH THROUGH BANKING CHANNEL. HE IS AN ASSESSEE W ITH THE DEPARTMENT AND HIS BANK STATEMENT WAS PRODUCED DURING THE ASSE SSMENT PROCEEDINGS. AS PER THE A.O., THIS AMOUNT HAS BEEN ADVANCED OUT OF LOAN TAKEN BY HIM. BUT, IN OUR CONSIDERED OPINION, THE LD. CIT(A) HAS CORRECTLY FOUND THIS CREDITOR AS EXPLAINED IN VIEW OF PROVISIONS OF 7 SECTION 68 OF THE ACT. FURTHER, WE ARE ALSO IN AGR EEMENT WITH THE LD. CIT(A)S OBSERVATION THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED BY THE A.O. AND PROFIT IS ESTIMATED, NO FURTHER ADDITI ON U/S 68 OF THE ACT IS JUSTIFIED. IN THIS REGARD, FOLLOWING DECISIONS INCLUDING THAT OF THE HON'BLE JURISDICTIONAL HIGH COURT, ARE RELEVANT: 1. CIT VS. AGGARWAL ENGG. CO. [2006] 156 TAXMAN 40 P & H] 2. CIT VS. G.K. CONTRACTOR [2009] 1 SET 93 [RAJASTH AN HIGH COURT] 3. CIT VS. BANWARI LAL BANSIDHAR [1998] 229 ITR 229 4. GUPTA CONSTRUCTION CO. VS. ACIT 84 TTJ 46 [ALL] 5. ITO VS. CHETAN RAM GOPAL [2001] 114 TAXMAN 26 [J ODH] ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE FI NDING OF THE LD. CIT(A) WHEREBY HE HAS DELETED TOTAL ADDITION OF RS. 76,38,190/- ADDED BY THE A.O. U/S 68 OF THE ACT. ACCORDINGLY, WE REJ ECT GROUND NO. (II) OF THIS APPEAL. 8 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH MARCH, 2014. SD/- SD/- [N.K. SAINI] [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13 TH MARCH, 2014. VL/ COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. DR, ITAT, JODHPUR 6. GUARD FILE BY ORDER AR, ITAT, JODHPUR