SUDHIR SHARMA, Jaipur V. ITO, Jaipur

ITA 365/JPR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2034 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 09-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P P MEENA JCIT DR DHK
• Assessee Lawyers: F REHMAN
• Keywords: Depreciation
• Section: 244A

Judgement Text

ITA NO.365/JP/201 7 S HRI SUDHIR SHARMA VS ITO, WARD- 5(2), JAIPUR 1 VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 365/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 SHRI SUDHIR SHARMA C-48, SETHI COLONY, JAIPUR CUKE VS. THE ITO WARD- 5(2), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: BCYPS 2416 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI F. REHMAN, ADVOCATE JKTLO DH VKSJ LS@ REVENUE BY :SHRI P.P. MEENA, JCIT- DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 21/09/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 29 /09/2017 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-5, JAIPUR DATED 22-06-2016 FOR THE ASSESSMENT YEAR 20 10-11 RAISING THE FOLLOWING GROUNDS OF APPEAL. 1. THE IMPUGNED ADDITION MADE IN THE ORDER U/S 143 (3) OF THE ACT DATED 27-11-2012 IS BAD IN LAW AND ON FACTS OF THE CASE, FOR WANT OF JURISDICTION AND VARIOUS OTHER REASONS AND HENCE THE SAME MAY KI NDLY BE DELETED. 2.1 THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE F ACTS OF THE CASE IN CONFIRMING THE APPLICATION OF SEC 145(3). THE PROVI SION SO INVOKED BY THE AO AND CONFIRMING THE ADDITION BY THE LD. CIT(A) BEING CON TRARY TO THE PROVISIONS OF LAW AND FACTS, THE SAME KINDLY BE QUASHED. CONSEQUENTLY , THE TRADING ADDITION OF RS. 8,05,640/- BE DELETED IN FULL. ITA NO.365/JP/201 7 S HRI SUDHIR SHARMA VS ITO, WARD- 5(2), JAIPUR 2 ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE. 2.2 THE LD. CIT(A) FURTHER ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN DIRECTING TO APPLY NET PROFIT RATE OF 6.02% AS AGAINST 3.07% DECLARED BY THE ASSESSEE AND THUS THEREBY CONFIRMING THE TRADIN G ADDITION OF RS. 8,05,640/-. THE ADDITION SO MADE BY THE LD. CIT(A) BEING TOTALL Y CONTRARY TO THE PROVISONS OF LAW AND FACTS OF THE CASE, KINDLY BE DELETED IN FUL L. 3. THE AO FURTHER ERRED IN LAW AS WELL AS ON THE FA CTS OF THE CASE IN CHARGING INTEREST U/S 234A, 234B, 234C & 234D OF TH E ACT AS ALSO IN WITHDRAWING INTEREST U/S 244A OF THE ACT. THE APPELLANT TOTALLY DENIES ITS LIABILITY OF CHARGING AND WITHDRAWAL OF ANY SUCH INTEREST. THE INTEREST S O CHARGED/ WITHDRAWN BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS KINDLY BE DELETED IN FULL. 2.1 THE GROUND NO. 1 OF THE ASSESSEE IS GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION. 3.1 APROPOS GROUND NO. 2 AND 2.1 OF THE ASSESSEE, T HE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- 2.3. I HAVE CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE BRI EF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LABOUR CONTRACTOR. DURIN G THE YEAR UNDER CONSIDERATION THE TURNOVER HAS INCREASED FROM RS. 9 3.06 LACS LAST YEAR TO RS. 274.89 LACS THIS YEAR. HOWEVER, IN THE LABOU R EXPENSES, WHICH ARE THE MAJOR EXPENSES, THERE IS A DISPROPORTIONAT E RISE FROM RS. 47 LAC (I.E. 50% OF TURNOVER) LAST YEAR TO RS. 208 LAC (I.E. 75.9% OF TURNOVER) THIS YEAR. THIS HAS LED TO FALL IN NET PR OFIT FROM 6.0% LAST YEAR TO 3.07% THIS YEAR. THIS AO NATURALLY EXAMINED THE LABOUR EXPENSES AND FOUND THAT NO LABOUR OR WAGES REGISTER OR VOUCHERS WERE MAINTAINED BY THE APPELLANT AND SINCE THIS WAS THE MAIN ITEM OF THE EXPENDITURE, WHICH WAS FOUND TO BE UNVERIFIABLE, TH E AO REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE PROFIT BY ADOPTI NG N.P. RATIO OF 6% AS SHOWN BY THE ASSESSEE HIMSELF IN THE PRECEDIN G YEAR. THE APPELLANT HAS CONTENDED THAT PROPER VOUCHERS FOR LA BOUR EXPENSES ARE MAINTAINED AND ALSO PRODUCED BEFORE THE AO. THUS, I N ORDER TO VERIFY THE DIFFERING VERSIONS OF THE AO AND THE ASSESSEE, THE APPELLANT WAS ASKED TO PRODUCE ALL VOUCHERS FOR LABOUR PAYMENT FO R THE MONTH OF ITA NO.365/JP/201 7 S HRI SUDHIR SHARMA VS ITO, WARD- 5(2), JAIPUR 3 MARCH, 2010, PARTICULARLY THOSE PERTAINING TO CASH PAYMENTS. THE APPELLANT PRODUCED A MONTHLY PAY-SHEET SUPPOSEDLY S IGNED BY THE LABOURERS AND FURTHER SUBMITTED THAT NO SEPARATE CA SH VOUCHERS FOR DAILY PAYMENTS TO LABOURERS ARE MAINTAINED. IT IS N OTEWORTHY THAT CASH PAYMENTS TO LABOURERS DURING THE YEAR ARE OF RS. 1. 78 CRORES, WHICH IS 65% OF TOTAL TURNOVER. FURTHER, IT IS A FACT THAT I NDIVIDUAL LABOURERS ARE PAID DAILY AND CANNOT WAIT FOR THE MONTH END TO REC EIVE THEIR DUES. THE ASSESSEE HAS ADMITTEDLY NOT BEEN ABLE TO PRODUC E PROOF OF SUCH DAILY PAYMENT AND HAS HENCE NOT DISCHARGED ITS ONUS OF PROVING THE GENUINENESS OF SUCH EXPENSES, MORE SO WHEN SUCH CAS H EXPENSES CONSTITUTE MAJOR CHUNK OF TOTAL EXPENSES AND SUCH D AILY PAYMENT VOUCHERS ARE VITAL EVIDENCE OF INCURRING SUCH EXPEN SES. ON THE OTHER HAND, THE MONTHLY PAY-SHEET PRODUCED BY THE APPELLA NT SUFFERS FROM SEVERAL LACUNAE. FIRSTLY, AS STATED EARLIER, THE PA YMENTS TO SUCH INDIVIDUAL LABOURERS ARE NEVER MADE MONTHLY. SECOND LY, THE PURPORTED SIGNATURES OF LABOURERS ON THESE MONTHLY PAY SHEETS APPEAR TO BE STRIKINGLY SIMILAR IN THE CASE OF SEVERAL INDIVIDUA LS. FOR CLARITY ON THIS ISSUE, TWO PAGES OF THE PAY-SHEETS ARE ENCLOSED AS ANNEXURE 1 AND 2 TO THIS ORDER, WHEREFROM IT IS CLEAR THAT SIGNATURE S OF CHANDRAKUMAR, ASIDUAL, PAPPU & NASIRUDDIN IN ANNEXURE 1 ARE IN SA ME HANDWRITING. SIMILARLY, SIGNATURES OF BAPI, JAGRAM, KAJOD, KHALI L, LABHUMIYA, LILA BANJARA AND MUBARAK IN ANNEXURE 2 ARE IN THE SAME H ANDWRITING. THUS, THE MONTHLY PAY-SHEET IS NOTHING BUT A FABRIC ATED EVIDENCE. IN ANY CASE, THE MATERIAL EVIDENCE IS DAILY PAYMENT VO UCHERS, WHICH THE ASSESSEE HAS NOT PRODUCED. THE CLAIM OF LABOUR EXPE NDITURE IS THUS UNVERIFIABLE. IN THIS SITUATION, TRUE PROFITS CANNO T BE WORKED OUT FROM THE BOOKS OF ACCOUNT, WHICH ARE NOT RELIABLE. THE A OS ACTION IN REJECTING THE BOOKS OF ACCOUNT IS THEREFORE UPHELD. 2.4 THE ASSESSEE HAS FURTHER TRIED TO JUSTIFY THE DISPROPORTIONATE RISE IN LABOUR EXPENSES THIS YEAR AS COMPARED TO PRECEDING YEAR, BY STATING THAT IN PRECEDING YEAR U NSKILLED LABOUR WAS INVOLVED, TO WHOM PAYMENTS WERE MADE AT LESSER RATE S AND IN THIS YEAR THE PROJECT WAS IN FINAL STAGES INVOLVING SKILLED W ORK LIKE MASONRY, PLASTER, TILES AND MARBLE WORK FOR WHICH WAGE RATE IS HIGHER. IT IS HOWEVER SEEN FROM THE RATE OF LABOUR PAID FOR EACH ITEM OF WORK AS PER MONTHLY PAY-SHEETS FOR DIFFERENT JOBS/ITEMS THAT FO R ALL ITEMS OF WORK WITHOUT EXCEPTION, THE RATE OF LABOUR PAYMENT IS I N THE RANGE OF RS. 110 TO RS. 250. THE APPELLANTS CONTENTION REGARDIN G DIFFERENT RATES PAID TO SKILLED AND UNSKILLED LABOURERS IS THUS NOT BORNE OUT BY FACTS. ITA NO.365/JP/201 7 S HRI SUDHIR SHARMA VS ITO, WARD- 5(2), JAIPUR 4 THE AO HAS THUS RIGHTLY ADOPTED THE ASSESSEES OWN N.P. RATIO OF 6% IN THE PRECEDING YEAR FOR ESTIMATING PROFITS THIS Y EAR. THEREFORE, I AM UNABLE TO FIND ANY LACUNAE IN THE AOS ESTIMATION O F PROFITS. ACCORDINGLY, THE ADDITION OF RS. 8,05,640 MADE BY A DOPTING N.P. RATIO OF 6%, IS HEREBY UPHELD. 3.2 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE PRAYED THAT THE LD. CIT(A) HAS CONFIRMED THE APPLICATION OF PROVISION O F SEC 145(3) OF THE ACT AND ALSO CONFIRMED THE ADDITION OF RS. 8,05,640/-MADE B Y THE AO WHICH SHOULD BE DELETED. THE LD.AR OF THE ASSESSEE FILED THE WRITTE N SUBMISSION TO THIS EFFECT ON 21-09-2017 WHICH HAS BEEN TAKEN INTO CONSIDERATION WHILE ADJUDICATING UPON THE GROUNDS RAISED IN THE WRITTEN SUBMISSION BY THE LD. AR OF THE ASSESSEE. 3.3 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ER OF THE LOWER AUTHORITIES. 3.4 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS ENGAGED IN THE WORK OF CIVIL CONSTRUCTION. DURING THE YEAR, THE ASSESSEE HAD DEC LARED THE NET PROFIT OF RS. 8,43,722/- FROM THE GROSS RECEIPTS OF RS. 2,74, 89,370/- AS UNDER:- ASSESSMENT YEAR 2009-10 2010-11 GROSS RECEIPTS 93,06,096/- 2,74,89,370/- PROFIT (BEFORE DEPRECIATION & INTEREST 6,88,855/- @ 7.40% 12,57,580 @ 4.54% DEPRECIATION 1,06,766/- 3,66,898/- INTEREST 22,014/- 36,970/- ITA NO.365/JP/201 7 S HRI SUDHIR SHARMA VS ITO, WARD- 5(2), JAIPUR 5 NET PROFIT (AFTER DEPRECIATION & INTEREST) 5,60,075/- @ 6.02% 8,43,722/- @ 3.07% THE AO DURING THE COURSE OF ASSESSMENT PROCEEDING N OTED THAT THE GROSS RECEIPTS OF THE ASSESSEE HAD INCREASED BUT THE NET PROFIT RATE HAD DECLINED SUBSTANTIALLY. THE AO ASKED THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOU NT WITH ALL THE VOUCHERS FOR EXAMINATION. THE ASSESSEE PRODUCED THE BOOKS OF ACC OUNT CONSISTING OF CASH BOOK & LEDGER BUT EXPENSES WERE NOT SUPPORTED BY PROPER VERIFIABLE VOUCHERS. THE AO ALSO NOTED THAT THE DETAILS OF SITE-WISE EXPENSES H AD NOT BEEN MAINTAINED AND MOST OF THE EXPENSES WERE INCURRED IN CASH WITHOUT PROPE R VOUCHERS AND THEY WERE NOT SUBJECT TO VERIFICATION. THE AO TAKING INTO CONSIDE RATION THE REPLY OF THE LD.AR OF THE ASSESSEE INVOKED THE PROVISIONS OF SEC 145(3) O F THE ACT AND OBSERVED THAT TRUE AND CORRECT PROFIT CANNOT BE DETERMINED BECAUSE OF DISCREPANCIES FOUND IN THE BOOKS OF ACCOUNT AND THUS THE AO MADE AN ADDITION OF RS. 8,05,640/- BY APPLYING THE 6% NET PROFIT RATE. THE LD. CIT(A) HAS CONFIRME D THE ACTION OF THE AO. IT IS NOTED THAT THERE IS HEAVY INCREASE IN THE TURNOVER OF THE ASSESSEE BUT THERE IS A FALL IN THE N.P. RATE @ 3.07% IN THE A.Y. 2010-11 AS COM PARED TO N.P. RATE @ 6.02% IN THE PRECEDING A.Y. 2009-10. TAKING INTO CONSIDERATI ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND TO PLUG THE LOOPHOLES OF THE LEAKAG E OF REVENUE, I ESTIMATE THE ADDITION TO THE EXTENT OF RS. 2.00 LACS. THUS THE A PPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.365/JP/201 7 S HRI SUDHIR SHARMA VS ITO, WARD- 5(2), JAIPUR 6 4. THE GROUND NO. 3 OF THE ASSESSEE IS REGARDING CH ARGING OF INTEREST U/S 234A, 234B, 234C & 234D AND ALSO WITHDRAWING INTEREST U/S 244A OF THE ACT WHICH ARE MANDATORY AND CONSEQUENTIAL IN NATURE. 5.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/09/201 7. SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 29 /09/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI SUDHIR SHARMA,JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 5(2), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 365/JP/2017 ) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR