ACIT, PALI V. Shri Mangilal Choudhary, PALI

ITA 357/JODH/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1581 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-02-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 21-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SEHGAL
• Keywords: Rejection of books of accounts; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 357/JU/2011 ASSESSMENT YEAR : 2007-08 THE ACIT, VS. SHRI MANGILAL CHAUDHARY, PALI PROP. M/S CHOUDHARY CONSTRUCTION CO. L/H JANKU DEVI SATYA NARAYAN, MOHAR SINGH, PALI MARWAR, PAN NO. AAMPC8532B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DEEPAK SEHGAL RESPONDENT BY : SHRI RAJENDRA JAIN DATE OF HEARING : 12.2.2013 DATE OF PRONOUNCEMENT : 19.2.2013 ORDER PER N.K.SAINI, A.M. THIS IS AN APPEAL FILED BY THE DEPARTMENT AGAINST T HE ORDER DATED 12.8.2011 OF CIT(A) JODHPUR. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L:- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE CIT(A), JODHPUR IS PERVERSE AS HE IGNORED ALL THE FACTS AND DEFECTS POINTED OUT BY THE AO IN THE ASSESSMENT ORDER FOR ADOPTION OF NET PROFIT RATE OF 12.5% SUBJECT TO DEPRECIATION AND INTEREST. 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE ID. CIT(A), JODHPUR HAS ERRED IN DIRECTING THE AO TO ADOPT NET PROFIT A S DISCLOSED IN BOOKS OF ACCOUNTS WHEN PARTICULARLY, HE UPHELD REJECTION OF BOOKS OF ACCOUNTS AND APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE I.T. ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE ID. CIT(A), JODHPUR HAS ERRED IN RELYING UPON REJECTED BOOKS OF ACCOUNT S, ON THE BASIS OF WHICH CORRECT PROFIT COULD BE DEDUCED, FOR GIVING DIRECTI ON OF APPLYING DECLARED NET PROFIT RATE OF 8.32% SUBJECT TO DEPRECIATION AN D INTEREST. 4. THE ID. CIT(A), JODHPUR HAS ERRED IN RELYING UPON T HE DECISION OF HON'BLE ITAT FOR A.Y. 2006-07 FOR DIRECTING THE AO TO ADOPT DECLARED N.P. RATE WHEN PARTICULARLY THE FACTS AND CIRCUMSTANCES OF BU SINESS AND PRICE FACTORS DUE TO PERIOD OF PROJECT FOR PROFIT RATE ARE DIFFER ENT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE ID. CIT(A), JODHPUR HAS ERRED IN DIRECTING THE AO TO TREAT THE INCOME O F THE ASSESSEE FROM INTEREST ON FDRS AND NSC AS ASSESSEE'S BUSINESS INC OME. 3. FROM THE ABOVE GROUNDS, IT IS GATHERED THAT THE GRIEVANCE OF THE DEPARTMENT RELATES TO NET PROFIT RATE OF 8.32% DIRE CTED TO BE APPLIED INSTEAD OF 12.5% SUBJECT TO DEPRECIATION AND INTERE ST ADOPTED BY THE ASSESSING OFFICER. 4. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE IS A CIVIL CONTRACTOR AND HAS CARRIED OUT WORKS ORDER AWARDED BY VARIOUS GOVERNMENT DEPARTMENTS BESIDES THE INCOME FROM CONTRACT WORK. THE ASSESSEE ALSO HAD 3 SHOWN INCOME FROM INTEREST AND FILED HIS RETURN OF INCOME ON 31.10.2007 DECLARING TOTAL INCOME OF RS. 27,06,860/-. THE CAS E WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER DURING THE COURSE O F ASSESSMENT PROCEEDINGS ALTHOUGH OBSERVED THAT THE NET PROFIT S HOWN BY THE ASSESSEE @ 5.013% IS BETTER THAN 1.1% DECLARED IN THE IMMEDIAT E PRECEDING YEAR, HOWEVER, THE TRADING RESULTS WOULD NOT BE ACCEPTED AS SUCH, AS THE BOOKS OF ACCOUNT AND RELATED VOUCHERS PRODUCED DURING THE AS SESSMENT PROCEEDINGS SUFFERED FROM THE VARIOUS DEFECTS, WHICH WERE AS UN DER:- A. THE ASSESSEE IS NOT MAINTAINING SITE WISE STOCK REGISTE R B. FOR SOME OF THE EXPENSES LIKE SAND SOIL, STONE, GRIT, ELECTRICITY ETC. VOUCHERS ARE SELF MADE AND PAYMENT WAS MADE IN CASH. C. PAYMENT OF WAGES WAS NOT FOUND IN ORDER. D. THERE WAS VARIATION IN THE VOUCHERS REGARDING PU RCHASE OF CEMENT, INSTANCE OF WHICH GIVEN IN THE ASSESSMEN T ORDER. E SOME OF THE CREDITORS WERE NOT FOUND GENUINE AND VERIFIABLE. F. THE ASSESSEE HAS NOT SHOWN THE INCOMPLETE WIP IN CREDIT SIDE . 5. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO A S 'THE ACT' IN SHORT] AND REJECTED THE BOOKS OF ACCOUNT. HE DETERMINED T HE INCOME OF THE ASSESSEE BY APPLYING PROFIT RATE OF 12.5%. 4 6. THE ASSESSEE CARRIED THE MATTER TO THE LEARNED C IT(A) WHO UPHELD THE REJECTION OF THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT. HOWEVER, BY FOLLOWING THE DECISION OF THE ITAT IN THE ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2006-07 DIRECTED THE ASSESSING OFFI CER TO APPLY THE NET PROFIT RATE OF 8.32% SUBJECT TO THE DEPRECIATION AN D INTEREST INSTEAD OF NET PROFIT RATE OF 12.5% ADOPTED BY THE ASSESSING OFFIC ER. NOW THE DEPARTMENT IS IN APPEAL. 7. THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUT SET STATED THAT THIS ISSUE IS SQUARELY COVERED VIDE ORDER DATED 31.5.201 0 IN ASSESSEES OWN CASE IN ITA NO. 550/JU/2009 FOR THE ASSESSMENT YEAR 2006 -07. COPY OF THE SAID ORDER WAS FURNISHED. 8. IN HIS RIVAL SUBMISSIONS, THE LEARNED DR ALTHOUG H SUPPORTED THE ORDER OF THE ASSESSING OFFICER BUT COULD NOT CONTRO VERT THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. 9. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PA RTIES AND THE MATERIAL AVAILABLE ON RECORD, IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE LEARNED CIT(A) BY FOLLOWING THE EARLIER ORDER O F THE TRIBUNAL IN ASSESSEES CASE FOR THE IMMEDIATELY PRECEDING YEAR DIRECTED THE ASSESSING OFFICER TO APPLY A NET PROFIT RATE OF 8.32 % WHICH WAS BETTER THAN THE NET PROFIT RATE DECLARED IN THE IMMEDIATELY PRECEDING Y EAR. WE DEEM IT APPROPRIATE TO REPRODUCE THE FINDINGS OF THE ITAT V IDE ORDER DATED 5 31.5.2010 IN ASSESSEES OWN CASE IN ITA NO. 550/JU/ 2009 FOR THE ASSESSMENT YEAR 2006-07, WHICH READ AS UNDER:- WE HAVE HEARD THE PARTIES WITH REFERENCE TO THE MA TERIAL AVAILABLE ON RECORD. IT IS NOT DISPUTED THAT ALL TH E ACCOUNTS BOOKS, SUCH AS CASH BOOK, LEDGER, JOURNALS, ATTENDA NCE REGISTERS, BILLS AND VOUCHERS WERE PRODUCED FOR EXA MINATION OF THE ASSESSING OFFICER. IT IS ALSO NOT DISPUTED THAT ALL THE VOUCHERS FOR PURCHASE AND SALES WERE PRODUCED BEFOR E THE LEARNED ASSESSING AUTHORITY, WHICH WERE EXAMINED BY HIM. THE CONTRACT RECEIPTS ARE VERIFIABLE FROM THE ACCOU NTS BOOK AND THE TDS CERTIFICATES FILED BY THE ASSESSEE. THE QUANTUM OF PURCHASE AND SALE ARE NOT DISPUTED. SIMILARLY BECA USE THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER, AND THE PROFIT RATE SHOWN BY THE ASSESSEE WAS CONSIDERED AS LOW, T HE ACCOUNT BOOK OF THE ASSESSEE COULD NOT BE REJECTED PARTICULARLY WHEN ALL THE PURCHASES AND SALES WERE PROPERLY VOUCHED. THE ASSESSEE HAS ALSO GIVEN PLAUSIBLE REAS ONS FOR DECLINE IN THE NET PROFIT RATE, IN AS MUCH AS, THE CONTRACTS AWARDED IN THE EARLIER YEARS WERE MOSTLY EXECUTED D URING THE YEAR UNDER CONSIDERATION AND THERE BEING STIFF COMP ETITION IN THE MARKET, THE PROFIT RATE EARNED BY THE ASSESSEE CAME DOWN DURING THE YEAR UNDER APPEAL. THE REVENUE COULD NOT BE ABLE TO REBUT THE CONTENTION MADE BY THE ASSESSEE TO SU BSTANTIATE THE DECLINE IN PROFIT RATE AS COMPARED TO THE IMMED IATELY PRECEDING YEAR IN THESE PECULIAR FACTS, THE LEARNE D AUTHORITIES BELOW DOES NOT APPEAR JUSTIFIED IN ESTI MATING THE NET PROFIT RATE OF 12.5% BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT IN THE INSTANT CASE. THIS VIEW FI NDS SUPPORT BY THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF MALANI RAMJIVAN JAGANNATH VS ACIT (SUPRA) W HEREIN IT HAS BEEN HELD THAT WHERE THE PURCHASE AND SALES ARE FOUND VOUCHED AND PLAUSIBLE REASONS HAVE BEEN ASSIGNED FO R DECLINE 6 IN PROFIT RATE, THE TRADING RESULT SHOWN BY THE ASS ESSEE CANNOT BE TAKEN TO BE UNTRUE. THE LEARNED AUTHORITIES BEL OW APPEAR TO HAVE TAKEN INTO CONSIDERATION THE DECISIONS IN T HE CASE OF HYDERABAD AND ORISSA FOR APPLICATION OF NET PROFIT RATE OF 12.5% WHEREAS IN THE CASES OF ASSESSEE ITSELF IN AS SESSMENT YEARS 2004-05 AND 2005-06 THE ASSESSING OFFICER HIM SELF HAS APPLIED THE NET PROFIT RATE OF 8% SUBJECT TO INTERE ST & DEPRECIATION. IN THE YEAR UNDER CONSIDERATION, IF THE REASONS ASSIGNED BY THE ASSESSEE FOR DECLINE IN PROFIT RATE ARE TAKEN INTO ACCOUNT, THE NET PROFIT RATE SHOWN BY THE ASSE SSEE CANNOT BE SAID TO BE UNJUSTIFIED IN VIEW OF THE DECISION O F ITAT, JODHPUR BENCH IN THE CASE OF M/S BHAWAN VA PATH NIR MAN (BOHRA) CO. (SUPRA). IN THE PECULIAR FACTS AND CIR CUMSTANCES OF THE CASE, WE FIND NO JUSTIFICATION TO SUSTAIN TH E ADDITION MADE ON ACCOUNT OF ALLEGED LOW PROFIT RATE. THE GR OUND RAISED BY THE ASSESSEE, THEREFORE, STAND ALLOWED. 10. SINCE IN THE YEAR UNDER CONSIDERATION, THE NET PROFIT RATE DECLARED BY THE ASSESSEE AT 8.32% IS BETTER THAN 6.32% DECLARED IN THE IMMEDIATELY PRECEDING YEAR, WE THEREFORE, RESPECTFULLY FOLLOWIN G THE AFORESAID REFERRED TO ORDER OF THE TRIBUNAL DO NOT SEE ANY INFIRMITY I N THE ORDER OF LEARNED CIT(A). ACCORDINGLY, WE DO NOT SEE ANY MERIT IN TH E REVENUES APPEAL. 11. IN THE RESULT, APPEAL IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 19.02.2013 ) SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 19 TH FEBRUARY, 2012 RKK 7 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR