The ACIT, Central Circle-1, JUNAGADH V. M/s. Parishram Builders, Veraval

ITA 367/RJT/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8890 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 10-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: USHA N SHROTE
• Assessee Lawyers: MJ RANPURA
• Section: 44AD; 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AHMEDABAD] BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA NO. 367/RJT/2014 ASSESSMENT YEAR : 2009-10 THE ACIT, CIRCLE-1, JUNAGADH VS M/S. PARISHRAM BUILDERS, KUNAL COMPLEX, TEACHERS COLONY, JUNAGADH ROAD, VERAVAL-362 266 PAN : AACFP 5403 G / (APPELLANT) / (RESPONDENT) ./ ITA NO. 687/RJT/2014 & CO NO.11/RJT/2015 ASSESSMENT YEAR : 2010-2011 THE ACIT, CIRCLE-1, JUNAGADH VS M/S. PARISHRAM BUILDERS, KUNAL COMPLEX, TEACHERS COLONY, JUNAGADH ROAD, VERAVAL-362 266 PAN : AACFP 5403 G / (APPELLANT) / (RESPONDENT) & CROSS-OBJECTOR REVENUE BY : USHA N SHROTE, SR DR ASSESSEE BY : M J RANPURA, AR / DATE OF HEARING : 14/02/2018 / DATE OF PRONOUNCEMENT: 22/02/2016 / O R D E R PER S.S. GODARA, JUDICIAL MEMBER :- THESE TWO REVENUES APPEALS FOR ASSESSMENT YEARS 20 09-10 AND 2010- 11 AND ASSESSEES CROSS-OBJECTION IN LATTER CASE AR ISE AGAINST CIT(A)-IV, RAJKOTS ORDER DATED 26.03.2014 AND 11.09.2014 IN C ASE NOS. CIT(A)- IV/0161/11-12 AND CIT(A)-IV/0056/13-14; RESPECTIVEL Y, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (I N SHORT THE ACT). ITA NOS. 367, 687/RJT/2014 & CO NO.11/RJT/2015 ASSESSEE : PARISHRAM BUILDERS AYS : 2009-10 & 2010-11 2 2. A PERUSAL OF REVENUES PLEADINGS IN BOTH THESE A PPEALS INDICATES THAT IDENTICAL ISSUES ARE SOUGHT TO BE RAISED FOR OUR AP T ADJUDICATION. LEARNED DEPARTMENTAL REPRESENTATIVE PINPOINTS THE FACT THAT FIRST COMMON ISSUE IN THESE TWO APPEALS IS THAT OF REJECTION OF BOOKS BY THE ASSESSING OFFICER UNDER SECTION 145(3) OF THE ACT HAS REVERSED IN LOW ER APPELLATE PROCEEDINGS. HE THEN SUBMITS THAT THE CIT(A) HAS PARTLY RESTRICT ED THE ASSESSING OFFICERS ACTION ESTIMATING 8% NET PROFITS ON ASSESSEES SELF EXECUTED CONTRACT WORK RECEIPTS AMOUNTING TO RS.2,01,94,365/-, 5% NET PROF IT ON SUBLET CONTRACT WORK AMOUNTING TO RS.50,14,247/- AND 5% NET PROFIT ON BLACK METAL SALES COMING TO RS.99,572/- IN FORMER ASSESSMENT YEAR AND SIMILAR NET PROFITS IN LATTER CASE ON CORRESPONDING GROSS RECEIPTS OF RS.1 3,10,03,194/-, RS.5,76,87,048/- AND RS.55,99,130/- IN LATTER APPEA L; RESPECTIVELY, TO A LUMP- SUM AMOUNT OF RS.5,00,000/- EACH IN THE TWO ASSESSM ENT YEARS IN QUESTION. WE THUS TREAT FORMER APPEAL ITA NO.367/RJT/2014 AS THE LEAD CASE. THE ASSESSEES CROSS-OBJECTION IN LATTER ASSESSMENT YEA R 2010-11 ON THE OTHER HAND SEEKS TO CHALLENGE THE CIT(A)S ACTION RESTRIC TING THE ABOVE ADDITION OF RS.5,00,000/- ONLY IN LOWER APPELLATE PROCEEDINGS. 3. WE NOW ADVERT TO THE RELEVANT BASIC FACTS. THER E IS NO DISPUTE THAT THIS ASSESSEE IS A FIRM ENGAGED IN CIVIL CONSTRUCTI ON BUSINESS. IT FILED ITS RETURN IN FORMER ASSESSMENT YEAR 2009-10 ON 30.09.2 009 DECLARING TOTAL INCOME AT RS.98,55,046/-. THE ASSESSING OFFICER TH EREAFTER FRAMED A REGULAR ASSESSMENT ON 23.06.2011 ASSESSING THE ABOVE INCOME AT RS.2,50,48,440/- AFTER REJECTING THE ASSESSEES BOOK RESULTS UNDER S ECTION 145(3) OF THE ACT THEREBY ESTIMATING ITS NET PROFITS AT RS.2,53,08,18 4/- COMPRISING OF THE ABOVE THREE ADDITIONS OF SELF EXECUTED CONTRACT WORK, SUB LET CONTRACT WORK AND BLACK METAL SALES (SUPRA). HE WAS INTER ALIA OF TH E OPINION THAT THE ASSESSEES BOOKS DID NOT MAINTAIN QUANTITATIVE DETAILS, ITS ST OCK REGISTER OF THE MATERIAL PURCHASED/CONSUMED WAS NOT PROPERLY MAINTAINED, THE WORK-IN-PROGRESS ITA NOS. 367, 687/RJT/2014 & CO NO.11/RJT/2015 ASSESSEE : PARISHRAM BUILDERS AYS : 2009-10 & 2010-11 3 WAS VALUED ON ESTIMATION BASIS, IT HAD SUBLET ITS C ONSTRUCTION WORK WITHOUT MAINTAINING CORRESPONDING SUPPORT ACCOUNT, THERE WA S NO AGREEMENT OF SUBLETTING WITH SUCH SUB-CONTRACTORS, IT HAD ENTERE D INTO SUBSTANTIAL TRANSACTIONS WITH SPECIFIED PERSONS UNDER SECTION 4 0A(2)(B) OF THE ACT, THE RELEVANT EXPENSES HAD BEEN SUPPORTED ONLY BY INTERN AL VOUCHERS INSTEAD OF INDEPENDENT VERIFICATION AND IT HAD NOT PROPERLY CO MPILED ITS VEHICLES LOG- BOOK; RESPECTIVELY. ALL THIS RESULTED IN REJECTION OF ASSESSEES BOOKS OF ACCOUNTS. THE ASSESSING OFFICER THEN QUOTED SECTIO N 44AD OF THE ACT FOR GUIDANCE PURPOSES TO CONCLUDE THAT ASSESSEES SELF EXECUTED CONSTRUCTION WORK, SUBLET PURCHASE AND BLACK METAL SALES OUGHT T O BE SUBJECTED TO 8% AND 5% (IN LATTER TWO INSTANCES); RESPECTIVELY, RESULTI NG IN THREE IMPUGNED ADDITIONS. 4. THE CIT(A) REVERSES ASSESSING OFFICERS FINDING QUA REJECTION OF BOOKS. HE THEN RESTRICTS THE ABOVE THREE ADDITIONS ON MERITS TO CUMULATING SUM OF RS.5,00,000/- ONLY AS UNDER:- 5. I HAVE PERUSED THE WRITTEN SUBMISSION OF THE AR AS ALSO THE ASSESSMENT ORDER. IT IS SEEN FROM THE ASSESSMENT ORDER (PARA 3 .) THAT, THE BOOKS WERE REJECTED AS THE APPELLANT HAD NOT MAINTAINED QUANTI TATIVE DETAILS, WIP WAS ON ESTIMATE BASIS, SUBSTANTIAL WORK WAS DONE THROUG H SUB CONTRACTS, THERE IS NO SUB CONTRACTS AGREEMENTS, THERE WERE SUBSTANTIAL TRANSACTIONS WITH PERSONS RELATED IN TERMS OF SECTION 40A(2)(B) AND L OG BOOK FOR VEHICLE IS NOT MAINTAINED. HOWEVER, NONE OF THE ABOVE REASONS FOR REJECTIONS WERE SPECIFIC IN NATURE, IN AS MUCH AS, THE AO FAILED TO HOLD WHI CH TRANSACTIONS WERE COVERED U/S. 40A(2)(B) AND TO HOW MUCH EXTENT THEY WERE OVER VALUED OR UNDER VALUED, HOW NON-MAINTENANCE OF LOG BOOK FOR U SE OF VEHICLES WOULD TRANSLATE INTO REJECTION OF BOOK RESULTS, HOW ESTIM ATION OF WIP MADE BY THE APPELLANT WAS UNDER VALUED, HOW BY NOT ENTERING INT O SUB-CONTRACT AGREEMENTS, THE APPELLANT'S BOOK DID NOT PRESENT A TRUE AND FAIR PICTURE, ETC. IN THE ABSENCE OF ANY SPECIFIC INSTANCE, IT WOULD B E DIFFICULT TO INFER THAT THE APPELLANT'S BOOKS DOES NOT PRESENT A TRUE AND A FAI R PICTURE. THEREFORE, REJECTING THE BOOK RESULTS, WITHOUT BRINGING FORTH ANY SPECIFIC INSTANCE OF FALSE PRESENTATION THROUGH THE BOOKS, WOULD BE HARS H AND UNJUST. THEREFORE, AS THERE ARE NO SPECIFIC INSTANCE FOR REJECTING THE BOOK RESULTS, THE AO IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 145 (3). HENCE, THE FIRST GROUND OF APPEAL IS ALLOWED. ITA NOS. 367, 687/RJT/2014 & CO NO.11/RJT/2015 ASSESSEE : PARISHRAM BUILDERS AYS : 2009-10 & 2010-11 4 6. THE NEXT THREE GROUNDS OF APPEALS ARE WITH REGAR D TO ESTIMATION OF APPELLANT'S PROFITS. AS DISCUSSED SUPRA, THE AO PRO CEEDED TO ESTIMATE THE INCOME OF THE APPELLANT BY INVOKING THE PROVISIONS OF SECTION 145(3). IN FACT, IT IS SEEN FROM THE ASSESSMENT ORDER THAT, THE AO H AS AGAIN NOT BROUGHT FORTH ANY REASON TO ESTIMATE THE GROSS TURNOVER OF THE AP PELLANT AT 8%, EXCEPT BY TAKING ANALOGY OF SECTION 44AD, THOUGH HOWEVER, THE AO HIMSELF ACCEPTS THAT THE APPELLANT'S CASE IS NOT COVERED BY SECTION 44AD. HE FURTHER HELD THAT, EVEN SMALL AND MARGINAL CONTRACTORS EARN 3% A ND THEREFORE THE APPELLANT WITH GREATER CAPITAL OUTLAY AND BIGGER CO NTRACT RECEIPTS SHOULD MINIMUM HAVE INCOME OF 8%. HOWEVER, AGAIN THE AO FA ILED TO BRING ANY SPECIFIC INSTANCE ON RECORD. NO COMPARATIVE CASES W ERE CITED OR COMPARED. MERELY BECAUSE SECTION 44AD PRESCRIBES MANDATORY 8% GP ON GROSS RECEIPTS, DOES NOT TRANSLATE INTO SUCH INCOME IN TH E HANDS OF THE APPELLANT, PARTICULARLY WHEN NO SPECIFIC INSTANCE HAS BEEN QUO TED. THEREFORE, IN THE ABSENCE OF ANY DETAILS TO SUPPORT THE FINDING OF TH E AO, THE ESTIMATION APPEARS TO BE ON THE HIGHER SIDE. 6.1 FURTHER, BY ESTIMATING PROFIT AT 5% ON SUB-LET WORKS AND ESTIMATING THE INCOME FROM SALE OF BLACK METAL, THE AO HAS NOT BRO UGHT FORTH ANY SPECIFIC INSTANCE. THE PROVISIONS OF INCOME TAX ACT ARE RULE D BY FACTS AND NOT BY SURMISES. UNLESS THERE IS SPECIFIC INSTANCE THAT TH E APPELLANT HAD EARNED INCOME WHICH WAS NOT BROUGHT FORTH FOR TAX, IT CANN OT BE NOTIONALLY HELD THAT THE APPELLANT MAY HAVE EARNED INCOME, IN ORDER TO T AX THE SAME. HENCE, IN THE ABSENCE OF ANY DETAILS, THE FINDING OF THE AO I S HELD TO BE MERE SURMISE AND ON PRESUMPTIVE BASIS. IT IS AN ESTABLISHED RULE THAT, SURMISES HOWEVER STRONG IT MAY APPEAR, CAN NEVER TAKE THE PLACE OF F ACTS. THEREFORE, THE ESTIMATION MADE BY THE AO IS RULED TO BE ON THE HIG HER SIDE AND THE SAME ARE REJECTED. 6.2 HOWEVER, AS HELD SUPRA, THOUGH THE REASONS FOR REJECTION OF BOOKS ARE HELD TO BE UNJUSTIFIED AND THE ESTIMATION IS HELD TO BE ON THE HIGHER SIDE, BUT IN ORDER TO AVOID ANY PILFERAGE OF REVENUE, AND IN THE INTEREST OF FAIR PLAY AND JUSTICE, I UPHOLD ADDITION TO THE TUNE OF RS.5 LACS . THUS, THE APPELLANT GETS RELIEF OF THE BALANCE AMOUNT. 6.3. IN LIGHT OF THE ABOVE, THE ADDITIONS MADE BY THE AO ARE DIRECTED TO BE DELETED. 5. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY S UBMITS DURING THE COURSE OF HEARING THAT THE ASSESSING OFFICER HAD RI GHTLY REJECTED ASSESSEES BOOKS IN ORDER TO ARRIVE AT 8% NET PROFIT ESTIMATED FIGURES IN QUESTION. SHE VEHEMENTLY SUPPORTS THE ASSESSING OFFICERS ACTION TO PRAY FOR REVIVING BOTH ITA NOS. 367, 687/RJT/2014 & CO NO.11/RJT/2015 ASSESSEE : PARISHRAM BUILDERS AYS : 2009-10 & 2010-11 5 REJECTIONS OF BOOKS AS WELL AS ALL THREE ADDITIONS ON MERITS. LEARNED AUTHORIZED REPRESENTATIVE ON THE OTHER HAND SUPPORT S THE LOWER APPELLATE FINDINGS EXTRACTED IN THE PRECEDING PARAGRAPHS. WE NOTICE IN THIS BACKDROP OF FACTS THAT THE ASSESSING OFFICER HAD REJECTED AS SESSEES BOOKS ON A VARIETY OF REASONS AS NARRATED IN THE PRECEDING PARAGRAPHS. WE HAVE PERUSED THE ASSESSING OFFICERS FINDING IN ASSESSMENT ORDER QUA THIS EFFECT. THERE IS NOT EVEN A SINGLE SPECIFIC INSTANCE QUOTED IN ASSESSEE S BOOKS INDICATING THE ABOVE STATED IRREGULARITIES. WE AFFORDED AMPLE OPP ORTUNITIES TO LEARNED DEPARTMENTAL REPRESENTATIVE TO REFER TO ANY FINDING S ON RECORD WHICH COULD INDICATE THAT THE SAME SUFFERED FROM ALL THE SAID S PECIFIC SHORTCOMINGS. THERE IS NO SUCH MATERIAL REFERRED BEFORE US IN SUP PORT OF ASSESSMENT FINDINGS. IT THUS TURNS OUT TO BE A CASE WHEREIN L EARNED ASSESSING OFFICER PROCEEDED TO REJECT ASSESSEES BOOKS OF ACCOUNTS WI THOUT EVEN DEALING WITH ALL THE SPECIFIED PARAMETERS DISCLOSED THEREIN. W E FURTHER FIND IN PAGE NO.7 OF THE CIT(A)S ORDER THAT THE ASSESSEES NET PROFI T RATE IS @ 2.82% AS AGAINST 1.43% AND 2.0% IN ASSESSMENT YEAR 2007-08 AND 2008- 09; RESPECTIVELY. WE WISH TO QUOTE HONBLE JURISDICTIONAL HIGH COURTS J UDGMENT IN CIT VS. VIKRAM PLASTIC & ORS, 239 ITR 161, THAT SECTION 145 IS NOT TO BE INVOKED FOR REJECTING AN ASSESSEES BOOKS IN ABSENCE OF ANY MAT ERIAL BROUGHT ON RECORD TO ESTABLISH THAT RELEVANT PURCHASES OR EXPENSES WERE INFLATED OR SALES SUPPRESSED OR THAT THE TAX PAYER CONCERNED HAD NOT FOLLOWED THE REGULAR METHOD OF ACCOUNTING. IT HAS FURTHER COME ON RECOR D THAT THE CIT(A) HAS STILL UPHELD THE IMPUGNED ADDITION ON MERITS TO A L UMP-SUM FIGURE OF RS.5,00,000/- DESPITE UPHOLDING ASSESSEES BOOKS OF ACCOUNTS. WE THEREFORE SEE NO REASON TO INTERFERE WITH THE LEARNED CIT(A) S ABOVE EXTRACTED FINDINGS GRANTING PART RELIEF TO THE ASSESSEE. THE REVENUES TWIN SUBSTANTIVE GRIEVANCES ON REJECTION OF BOOKS AS WELL AS MERITS ALONG WITH ITS MAIN APPEAL ITA NO.367/RJT/2014 FAIL ACCORDINGLY. ITA NOS. 367, 687/RJT/2014 & CO NO.11/RJT/2015 ASSESSEE : PARISHRAM BUILDERS AYS : 2009-10 & 2010-11 6 6. SAME ORDER TO FOLLOW IN ITA NO.687/RJT/2014 AS I T HAS ALREADY COME ON RECORD THAT REVENUES GRIEVANCE THEREIN IS IDENT ICAL TO THAT IN FORMER APPEAL. 7. THESE TWO REVENUES APPEALS ARE ACCORDINGLY DISM ISSED. 8. LEARNED COUNSEL REPRESENTING ASSESSEE INFORMS US THAT THE ASSESSEE NO MORE WISHES TO PRESS CROSS-OBJECTION NO.11/RJT/2015 KEEPING IN MIND OUR ADJUDICATION OF APPEALS ON MERITS AS WELL AS IN VIE W OF THE SMALLNESS OF THE AMOUNT INVOLVED THEREIN. ASSESSEES CROSS-OBJECTIO N NO.11/RJT/2015 IS THUS DISMISSED AS NOT PRESSED. 9. IN THE RESULT, REVENUES APPEALS ITA NOS. 367 & 687/RJT/2014 AND ASSESSEES CROSS-OBJECTION CO NO.11/RJT/2015 ARE DI SMISSED. ORDER PRONOUNCED IN THE COURT ON 22 ND FEBRUARY, 2018 AT AHMEDABAD. SD/- SD/- (PRADIP KUMAR KEDIA) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED 22/02/2018 *BT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! / CONCERNED CIT 4. ! ( ) / THE CIT(A) 5. , / DR, ITAT, RAJKOT 6. & / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) ' #, / ITAT, RAJKOT