The ACIT, 1(1), Bhopal V. M/s. S,K.Jain, Bhopal

ITA 374/IND/2010

• Counselvise Citation: 37422714 RSA 2010
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 11-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H P VERMA
• Assessee Lawyers: PRADEEP KUMAR MITRA
• Keywords: Rejection of books of accounts
• Section: 44AD; 153A; 144; 139

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.584/IND/2010 A.Y. 2006-07 M/S. S.K. JAIN, BHOPAL PAN AAOFS 1606 A APPELLANT VS ACIT-1(1), BHOPAL RESPONDENT ITA NO.374/IND/2010 A.Y. 2006-07 ACIT-1(1), BHOPAL APPELLANT VS M/S. S.K. JAIN, BHOPAL PAN AAOFS 1606 A RESPONDENT APPELLANT BY : S/SHRI H.P. VERMA & ASHISH GOYAL RESPONDENT BY : SHRI PRADEEP KUMAR MITRA, SR. DR O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THESE CROSS-APPEALS BY ASSESSEE AND REVENUE ARE FIL ED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS)-I, BHOPAL, DATED 10.3.2010. THE DISPUTED AMOUNT IS WITH REGARD TO TOTAL ADDITION OF RS.2,09,29,803/- ( WHICH HAS BEEN RESTRICTED BY LD. CIT(A) TO RS.43,55,234/-) MA DE ON ACCOUNT OF SUPPRESSION OF NET PROFIT BY APPLYING TH E NET PROFIT RATE OF 6 % IN PLACE OF 8% APPLIED BY THE ASSESSING OFFICER. 2 THE ASSESSEE HAS ALSO CHALLENGED THE CONFIRMATION O F INVOKING THE PROVISIONS OF SEC. 145(3) OF THE ACT ON ACCOUNT OF REJECTION OF BOOKS OF ACCOUNTS. 2. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON THE FIL E. THE CRUX OF THE ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT EARLIER THE MATTER TRAVELLED TO THE TRIBUNAL WHEREIN VIDE ORDER IN ITA NO.215 AND 216/IND/2007 IN THE CASE OF THE ASSESSEE , THE ISSUE WAS PUT TO REST WITH THE ESTIMATION OF SUPPRE SSED NET PROFIT RATE @6%. THIS FACTUAL MATRIX WAS NOT CONTRO VERTED BY THE REVENUE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE, WE ARE R EPRODUCING HEREUNDER THE RELEVANT PORTION OF THE ORDER: 26. IN I.T.A.NO.01/IND/2008, GROUND NO.1, WHICH WILL TAKE CARE OF GROUND NO. 1 ITA. NO. 06/IND/2008 AND 07/IND/2008, READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 9, 09,592/- MADE BY THE ASSESSING OFFICER BY APPLYING NET PROFI T RATE OF 8 % ON ACCOUNT OF SUPPRESSION OF NET PROFIT OUT OF TOTAL ADDITION OF RS. 18,27,965/-. 27. THE FACTS, IN BRIEF, ARE THAT AS A CONSEQUENCE OF SEARCH ACTION AT THE RESIDENTIAL PREMISES OF THE JA IN FAMILY, 3 A SURVEY U/S 133-A WAS ALSO CONDUCTED AT THE OFFICE PREMISES OF THE ASSESSEE FIRM. THE ACTION U/S 153C WAS TAKEN AGAINST ASSESSEE FIRM, IN VIEW OF THE FACT THAT DURING THE COURSE OF SEARCH & SEIZURE ACTION CERTAIN INCRIMINATING DOCUM ENTS, UNEXPLAINED ASSETS WERE FOUND, WHICH BELONGED TO TH E ASSESSEE FIRM. THE A.O. ISSUED NOTICE U/S 153A, IN RESPONSE TO WHICH THE ASSESSEE FIRM FILED RETURNS FOR ASSESS MENT YEAR 1999-2000 TO 2004-05, DECLARING THE SAME INCOME A S SHOWN IN THE RETURNS FILED U/S 139 EXCEPT FOR ASSES SMENT YEAR 2001-02, WHEREIN INCOME ASSESSED U/S 144 WAS SHOWN. THE A.O. ISSUED VARIOUS NOTICES TO THE ASSESSEE FIRM IN THE COURSE OF ASSESSMENT PROCEEDINGS, WHICH MOSTLY REMAINED UN - COMPLIED FOR THE REASON THAT THE ASSESSEE EITHER CH OSE NOT TO APPEAR OR TO FILE THE EVASIVE/VAGUE REPLY. THE A.O. ALSO FOUND THAT THE BOOKS OF ACCOUNT WERE MISSING AND WH ATEVER COMPUTERIZED CASH BOOK, LEDGER ACCOUNT WERE PRODUCE D, THAT REVEALED THAT ALMOST ALL THE PAYMENTS TO SUPPLIERS WERE MADE IN CASH IN DENOMINATION BELOW RS. 20,000/-. TH E A.O. FURTHER FOUND THAT AT THE TIME OF SCRUTINY ASSESSME NT FOR ASSESSMENT YEAR 2001-02, THE ASSESSEE HAD STATED TH AT BILLS AND VOUCHERS WERE LYING AT SITES AT DIFFERENT SITES . HOWEVER, SUBSEQUENTLY IT WAS CLAIMED THAT ALL BOOKS OF ACCOU NT AND SUCH VOUCHERS/BILLS HAD BEEN LOST DUE TO THEFT, AT THE BUSINESS PREMISES OF THE ASSESSEE ON 13.11.2004 AND A COPY O F F.I.R. WAS ALSO SUBMITTED TO THE ASSESSING OFFICER. THE A. O., THEREAFTER, PROCEEDED TO COMPLETE THE ASSESSMENT U/ S 144 ON THE BASIS OF IMPOUNDED BOOKS OF ACCOUNT FOR THE ASS ESSMENT YEAR 2001-02. THE A.O. ALSO EXAMINED THE BOOKS OF A CCOUNT FOR THE POST SEARCH PERIOD OF ASSESSMENT YEAR 2005- 06 AND ON THE BASIS OF THESE EFFORTS OBSERVED THAT THE ASS ESSEE DID NOT MAINTAIN QUANTITATIVE DETAILS AND MOST OF THE P AYMENTS WERE MADE IN CASH, WHICH WERE UNVERIFIABLE ALSO. HE FURTHER HELD THAT REASONABILITY OF LABOUR EXPENSES AND CONS UMPTION OF MATERIAL VIS--VIS CONTRACT RECEIPTS ALSO REMAIN ED UNSUBSTANTIATED. THEREAFTER, HE NOTED THAT THE AUDI TORS HAD ALSO MADE CERTAIN OBSERVATIONS IN THEIR AUDIT REPOR T IN THE IMPUGNED ASSESSMENT YEARS, WHICH MAINLY PERTAINED T O CONFIRMATION OF BALANCES BY THE RESPECTIVE PARTIES AND SOME OF THE MUSTER ROLLS NOT BEING PRODUCED BEFORE THE A UDITOR. THE A.O. ALSO FOUND THAT THERE WERE SOME DEFICIENCI ES IN REPORT VIS--VIS ACTUAL FACTS IN RELATION TO THE PA YMENT OF SALARIES/OTHER PAYMENTS TO PARTNERS AND RELATED PER SONS. THE A.O. ALSO HELD THAT WHEN THE BOOKS OF ACCOUNT A ND 4 RECORD FOR ASSESSMENT YEAR 2005-06 HAD BEEN SEIZED BY THE DEPARTMENT, THEN, HOW THE AUDITORS COULD CERTIFY TH AT THEY HAD CARRIED OUT THE AUDIT AS PER BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THE A.O. FURTHER FOUND VARIOUS DISCREPANCIES REGARDING PAYMENT OF LABOURERS BASED UPON THE STATEMENT OF SUPERVISOR OF THE FIRM. ON THE BAS IS OF THESE ENQUIRIES/FACTS, THE A.O. HELD THAT AUDITED ACCOUNT S OR BOOKS OF ACCOUNT, TO THE EXTENT AVAILABLE, DID NOT REFLEC T TRUE STATE OF AFFAIRS OF ASSESSEES BUSINESS. HENCE, HE REJECT ED THE SAME BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE INCOME- TAX ACT, 1961, AND PROCEEDED TO COMPLETE THE ASSESS MENT U/S 144 OF THE ACT. THE A.O. REPRODUCED THE CHART OF CO NTRACT RECEIPTS, NET PROFIT SHOWN BY THE ASSESSEE AND OTHE R DETAILS FOR ALL THE IMPUGNED ASSESSMENT YEARS AT PAGE 32 OF THE ASSESSMENT ORDER, WHICH, FOR THE SAKE OF READY REFE RENCE, IS REPRODUCED AS UNDER : A.Y. CONTRACT RECEIPTS NET PROFIT SHOWN SALARY TO PARTNERS NET PROFIT BEFORE SALARY & INTEREST % NET PROFIT BEFORE SALARY ALLEGED S.CREDITORS 1999- 2000 60639494 2873195 150000 3023195 4.99 4410314 2000-01 57440645 1561085 150000 1711085 2.98 200350 2001-02 111745428 3665172* 150000 3815172 1.53* 1676300 2002-03 19795484822 10663876 150000 10813876 5.46 9035683 2003-04 337427236 17008562 240000 17248562 5.11 12368801 2004-05 506873623 29427581 240000 29667581 5.85 26469416 2005-06 758073956 25461302 240000 25701302 3.39 3864696 TOTAL 2030155204 88556686 1320000 89876686 4.43 58025560 28. THE A.O., THEREAFTER, HELD THAT IN ASSESSMENT YEAR 2001-02, NET PROFIT BEFORE SALARY WAS ASSESSED AT RS. 71,34,090/- AND THE RATE OF NET PROFIT AGAINST THE CONTRACT RECEIPTS WORKED OUT TO 6.38 % AS AGAINST 1.53 % ORI GINALLY SHOWN BY THE ASSESSEE AND SUCH ACTION OF A.O. HAD B EEN ACCEPTED BY THE ASSESSEE BY NOT PREFERRING ANY APPE AL AGAINST SUCH ACTION. THE A.O. ALSO HELD THAT THE AS SESSEE HAD SURRENDERED A SUM OF RS. 1 CRORE IN ASSESSMENT YEAR 2005- 06 AS ITS UNCLOSED INCOME. HENCE, THE A.O. HELD THA T THESE FACTS CLEARLY INDICATED THAT THE ASSESSEE WAS SUPPR ESSING ITS TRUE NET PROFIT. THE A.O., THEREAFTER, HELD IF THE PROVISIONS OF SECTION 40A (3) WERE ALSO APPLIED IN RESPECT OF CAS H 5 PAYMENTS MADE IN EXCESS OF RS. 20,000/-, THEN, THE EFFECTIVE NET PROFIT RATE WOULD BECOME MUCH MORE THAN 15 %. T HE A.O. ALSO RECORDED STATEMENT OF PARTNERS, WHEREIN I T WAS STATED THAT ABOUT 30 % OF THE CONTRACT WORK WAS GIV EN TO THE SUB CONTRACTORS AFTER RETAINING 50 % OF THE MARGIN. THE A.O. ALSO EXAMINED THE TAX RETURNS OF ONE OF THE SUB CON TRACTORS, NAMELY, M/S. VIMAL TYAGI & COMPANY, BHOPAL, WHO HAD DECLARED NET PROFIT BEFORE SALARY AND INTEREST TO P ARTNERS @ 5.1 %. THE A.O. ALSO ANALYZED TRADING RESULTS OF OT HER SUB- CONTRACTORS FOR ASSESSMENT YEAR 2005-06 WITH THE QU ANTUM OF JOB RECEIPTS. THE A.O. ALSO FOUND THAT SOME OF T HE SUB CONTRACTORS WERE ACTUALLY EMPLOYEES OF THE ASSESSEE AND THIS TECHNIQUE WAS ADOPTED BY THE ASSESSEE TO SUPPRESS I TS ACTUAL PROFIT MARGIN. THE A.O., ACCORDINGLY, FORMED AN OPI NION THAT THE NET PROFIT @ 8% BEFORE SALARY AND INTEREST TO P ARTNERS WOULD BE THE MOST REASONABLE. ACCORDINGLY, HE WORKE D OUT THE SUPPRESSED NET PROFIT OF THE ASSESSEE FIRM AND MADE THE ADDITION ON THIS BASIS IN DIFFERENT YEARS. 29. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN THE ASSE SSEE CHALLENGED THE A.OS ACTION OF INVOKING PROVISIONS OF SECTION 145(3) FOR THE REASON THAT THE BOOKS OF ACC OUNT WERE DULY AUDITED U/S 44AB OF THE INCOME-TAX ACT, 1961, AND THE AUDIT REPORT HAD BEEN ATTACHED WITH THE RETURN OF I NCOME AND, THEREFORE, MERELY BECAUSE THE BOOKS OF ACCOUNT COULD NOT BE PRODUCED DUE TO THEFT JUST FEW DAYS BEFORE T HE SEARCH, THE ASSESSEES BOOK RESULTS COULD NOT BE REJECTED A S MINOR MISTAKES/DEFECTS IN APPORTIONMENT OF PROFIT COULD N OT BE A PROPER BASIS FOR REJECTING THE BOOKS OF ACCOUNT. T HE ASSESSEE ALSO SUBMITTED THAT IN ASSESSMENT YEAR 200 1-02, THE ASSESSEE COULD NOT PRODUCE THE BILLS OR VOUCHERS DU E TO THE FACT THAT THOSE WERE LYING AT DIFFERENT SITES AND M ERE NON- FILING OF APPEAL IN THAT YEAR WOULD NOT MEAN THAT T HE ASSESSEE HAD ACCEPTED THAT THERE WAS SOMETHING WRON G. IT WAS ALSO CONTENDED THAT THE RESULTS/FACTS OF ASSESS MENT YEAR 2001-02 COULD NOT BE APPLIED FOR ALL OTHER YEARS IN A BLANKET MANNER WITHOUT NOTICING THE FACTUAL DIFFERENCE IN E ACH YEAR. THE ASSESSEE ALSO SUBMITTED THE DETAILS OF VARIOUS SITES, WHERE THE WORKS WERE BEING CARRIED OUT BY THE ASSES SEE AND ALSO SUBMITTED THE DETAILS OF VARIOUS WORKS CARRIED OUT BY THE ASSESSEE .THE ASSESSEE ALSO CONTENDED THAT THES E SITES WERE AT REMOTE PLACES. THE ASSESSEE, THEREAFTER, CH ALLENGED THE ESTIMATION OF NET PROFIT @ 8% MAINLY FOR THE RE ASON THAT 6 THE ASSESSEE WAS SHOWING HIGHER NET PROFIT IN ALMOS T ALL THE IMPUGNED YEARS ON THE HIGHER TURNOVER. THE ASSESSEE ALSO SUBMITTED THAT DUE TO ASSESSEES WORK BEING CARRIED OUT AT REMOTE AREAS, IT WAS NOT POSSIBLE TO OPEN THE BANK ACCOUNT AT EACH SITE. IT WAS FURTHER CONTENDED THAT THE PAY MENTS WERE RECEIVED FROM THE GOVERNMENT AT BHOPAL, WHICH WERE DEPOSITED IN THE BANK ACCOUNT MAINTAINED AT BHOPAL AND DISBURSED THEREFROM. HENCE, THE PAYMENTS WERE MOSTL Y MADE IN CASH. IT WAS ALSO CONTENDED THAT EVEN IF THE BOO KS WERE TO BE REJECTED, THE A.O. HAD TO ESTIMATE THE PROFIT IN A JUDICIOUS MANNER AND ON THE BASIS OF SOME MATERIAL/REASONS. F OR THIS PROPOSITION, THE ASSESSEE ALSO RELIED ON VARIOUS JU DICIAL DECISIONS. THE LD. CIT (A), HOWEVER, CONFIRMED THE ACTION OF A.O. AS REGARDS THE REJECTION OF BOOKS OF ACCOUNT, AS IN VIEW OF THE LD. CIT (A), THERE WERE ENOUGH REASONS FOR R EJECTING THE BOOKS OF ACCOUNT. THEREAFTER, THE LD. CIT (A) B ASED UPON THE ACTION OF THE ASSESSEE IN ASSESSMENT YEAR 2001- 02, IN THE COURSE OF NORMAL ASSESSMENT FOR THAT YEAR, WHEREIN THE ASSESSEE HAD ACCEPTED THE NET PROFIT RATE OF 6.38 % ADOPTED BY THE ASSESSING OFFICER, WORKED OUT THE NET PROFIT RATE OF 6.5 % OF THE GROSS WORK DONE BY THE ASSESSEE IN ASSESSM ENT YEAR 1999-2000.THE LD. CIT(A) COMPUTED SUPPRESSED NET PR OFIT IN OTHER YEARS BY TAKING A NET PROFIT RATE BEFORE SALARY AND INTEREST TO PARTNERS ADOPTING AT 6.5% OR 6%. ACCORD INGLY, HE GAVE A PART RELIEF. AGGRIEVED BY THIS, BOTH THE ASS ESSEE AND REVENUE ARE IN APPEALS BEFORE US. 30. THE LD. CIT DR SUBMITTED THAT ASSESSMENT FOR ASSESSMENT YEAR 2001-02 HAD BEEN COMPLETED BEFORE S EARCH U/S 143(3), WHEREIN BOOKS OF ACCOUNT/VOUCHERS REQUI RED BY THE ASSESSING OFFICER WERE NOT PRODUCED. THE LD. CI T DR FURTHER SUBMITTED THAT AS A RESULT OF INVESTIGATION BY THE A.O., THE ASSESSEE REVISED ORIGINAL RETURN, WHEREIN THE RATE OF NET PROFIT WAS INCREASED TO 6.25% AS AGAINST 1.5 3 % ORIGINALLY DECLARED BY THE ASSESSEE. HE FURTHER DRE W OUR ATTENTION TO PAGE 12 OF THE ASSESSMENT ORDER REGARD ING FACT OF BOOKS OF ACCOUNT/OTHER RECORDS AND FILING OF FIR BY THE ASSESSEE ON 14.11.2004 BARELY 10 DAYS BEFORE THE SE ARCH, WHICH ALSO REFLECTED THE APPROACH OF THE ASSESSEE T O HIDE THE MATERIAL FACTS FROM THE DEPARTMENT. HE FURTHER CONT ENDED THAT VARIOUS DISCREPANCIES WERE FOUND BY THE ASSESS ING OFFICER, WHICH RESULTED IN TO SUCH ESTIMATION AND T HE A.O. HAD NOT APPLIED RATE OF 8 % ON THE BASIS OF PROVISI ONS OF SECTION 44AD, BUT ON THE BASIS OF SUCH DISCREPANCIE S, HENCE, 7 HIS ACTION WAS LIABLE TO BE CONFIRMED. THE LD. CIT DR IN SUPPORT OF HIS CLAIMS REFERRED TO PAGE 18, 20, 21, 22, 23, 38 AND 39 OF THE ASSESSMENT ORDER. IN NUT-SHELL, HE RE LIED ON THE ORDER OF THE A.O. THE LD. CIT DR ALSO REFERRED TO R ATE OF NET PROFIT RATE ADOPTED BY THE CIT(A) IN VARIOUS YEARS. HE FURTHER SUBMITTED THAT IN ASSESSMENT YEARS 1999-200 0 TO 2001-02, NET PROFIT RATE HAD BEEN ADOPTED BY THE CI T(A) AT 6.5 % AND IN ASSESSMENT YEAR 2002-03 TO 2005-06, TH E RATE OF NET PROFIT HAD BEEN ADOPTED BY THE CIT(A) AT 6%. HE FURTHER POINTED OUT THAT IN ASSESSMENT YEAR 2005-06 , THERE WAS AN ISSUE OF MAJORITY OF THE WORK BEING DONE AT SUB CONTRACT BASIS, WHEREIN THE RATE OF NET PROFIT HAD BEEN ADOPTED AT 4% BY THE CIT (A) IN ORDER TO FINALLY AR RIVE AT THE OVERALL NET PROFIT RATE AT 6%. 31. THE LEARNED COUNSEL FOR THE ASSESSEE MAINLY REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT (A). HE ALSO CONTENDED THAT AUDITED FINANCIAL STATEMENTS HA D BEEN FILED ALONGWITH THE ORIGINAL RETURN OF RESPECTIVE A SSESSMENT YEARS AND IT WAS NOT A CASE THAT THE BOOKS OF ACCOUNT/VOUCHERS WERE NOT MADE PRODUCED DELIBERATEL Y, AS THE SEARCH TOOK PLACE AFTER 10 DAYS OF THEFT AND TH E ASSESSEE COULD NOT BE IN A POSITION TO ANTICIPATE THAT A SEA RCH WAS GOING TO TAKE PLACE, SO THAT HE COULD HAVE REMOVED THE BOOKS OF ACCOUNT/VOUCHERS IN THIS MANNER. HE ALSO REFERRE D TO PAGE 233 OF THE PAPER BOOK CONTAINING COPY OF F.I.R ., WHICH WAS ISSUED AS PER THE PROCEDURE OF CODE OF CRIMINAL PROCEDURE; HENCE, THE SAME COULD NOT BE DOUBTED. HE , PARTICULARLY, EMPHASIZED ON THE POINT THAT NO TANGI BLE/UN- TANGIBLE ASSETS WERE FOUND DURING THE COURSE OF SEA RCH AND, THEREAFTER, HENCE, THE IMPUGNED ADDITION WAS NOT JU STIFIED. 32. THE LD. CIT DR, IN THE REJOINDER, CONTENDED THAT I F THE AUDITED ACCOUNTS WERE REFLECTING TRUE AND CORRE CT STATE OF AFFAIRS AND PROFIT, THEN THE ASSESSEE SHOULD NOT HAVE REVISED THE RETURN FOR ASSESSMENT YEAR 2001-02, HEN CE, THESE CONTENTIONS OF THE ASSESSEE WERE NOT ACCEPTABLE. HE FURTHER CONTENDED THAT THE AUDIT REPORT BY- ITSELF WAS NOT SUFFICIENT TO EXPECT THE NET PROFIT/GROSS PROFIT, PARTICULARLY WHEN THE AUDITOR HAD ALSO POINTED OUT SOME DEFECTS AND IN TH IS REGARD, THE LD. CIT DR REFERRED TO PAGE 26 OF THE ASSESSMEN T ORDER. 33. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND ORDERS OF THE AUT HORITIES BELOW. 8 34. BEFORE DECIDING THIS ISSUE ON MERITS, WE CONSIDER I T NECESSARY TO STATE THAT SEARCH OPERATIONS TOOK PLAC E 23-11- 2004 ON THE CONNECTED PERSONS. IT IS FURTHER NOTEWO RTHY THAT THE ASSESSEE SURRENDERED A SUM OF RS.7, 00, 000/- I N A.Y.2004-05 AND RS.50,000/- ON ACCOUNT OF SEIZED MA TERIAL INDICATING UNRECORDED EXPENDITURE AND RS. 1 CRORES IN A.Y. 2005-06 ON ACCOUNT OF SUNDRY CREDITORS. THUS, PRIMA RY CONDITION OF EXISTENCE OF SOME MATERIAL FOR INVOKIN G PROVISIONS OF SECTION 153C IS SATISFIED. THE RETUR N OF INCOME FOR A.Y. 2004-05 WAS FILED BY THE ASSESSEE ON 1-11- 04, BARELY 23 DAYS BEFORE THE SEARCH, HENCE, THE SAME I S TO BE TREATED AS A CASE OF ABATEMENT OF PENDING ASSESSME NT FOR THE REASON THAT TIME FOR MAKING AN ASSESSMENT UNDER SECTION 143 IS AVAILABLE AND THE ASSESSING OFFICER OF BOTH SEARCHED PERSONS AND ASSESSEE BEING THE SAME, HENCE, IT IS L OGICAL TO MAKE AN ASSESSMENT UNDER SECTION 153A READ WITH 153 C, ESPECIALLY WHEN THE SCOPE OF SUCH ASSESSMENT PROCEE DINGS WOULD BE NO DIFFERENT FROM THE SCOPE OF ASSESSMENT PROCEEDINGS UNDER SECTION 143 AND THERE BEING NO OT HER PREJUDICE TO THE INTERESTS OF THE ASSESSEE. CONSEQ UENTLY, WE HOLD THAT THE ASSESSMENT FOR ASSESSMENT YEAR 2004-0 5 IS TO BE FRAMED UNDER SECTION 153A READ WITH SECTION 153C . FURTHER, THE ASSESSMENT FOR THE ASSESSMENT YEAR 200 5-06 IS ALSO TO BE MADE AS PER THE PROVISIONS OF 153A READ WITH SECTION 153C IN VIEW OF OUR FINDINGS GIVEN IN PARA 20 OF THIS ORDER. 35. NOW, WE SHALL DECIDE THE VARIOUS ISSUES RAISED IN THESE APPEALS ON MERIT. IT IS NOTED THAT BOOKS OF A CCOUNT HAVE NOT BEEN PRODUCED AS THE SAME WERE NOT AVAILAB LE DUE TO THEFT. IT IS ALSO NOTED THAT SEVERAL OTHER DEFEC TS HAVE BEEN FOUND INCLUDING THE OBSERVATIONS OF THE TAX AUDITOR IN THEIR REPORT. THUS, THE ACTION OF THE LD. CIT (A) IN CONF IRMING THE REJECTION OF BOOKS OF ACCOUNT BY THE A.O. U/S 145(3 ) IS JUSTIFIED. NOW, THE ONLY ASPECT WHICH REMAINS TO BE ADJUDICATED IS THAT WHETHER THERE IS A PROPER BASIS WITH THE AO TO ESTIMATE THE NET PROFIT @ 8% BEFORE SALARY AN D INTEREST TO THE PARTNERS AND CONFIRMATION OF THE SA ME BY THE LD. CIT (A) TO 6%. IN THIS REGARD, IT IS NOTEWORTHY THAT BOTH THE REVENUE AUTHORITIES HAVE BASED THEIR DECISION I N REGARD TO ESTIMATION OF NET PROFIT RATE ON THE SUCH NET OF RATE PROFIT ARRIVED IN THE REGULAR ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2001-02 WHEREIN THE ASSESSEE HAD HI MSELF REVISED THE RETURN OF INCOME DECLARING NET PROFIT B EFORE 9 SALARY AND INTEREST @ 6.25%, WHICH WAS FURTHER ENHA NCED BY THE AO TO 6.38 % AND THE ASSESSEE HAD ACCEPTED S UCH ACTION. IN THIS REGARD, IT IS FURTHER TO BE NOTED T HAT NATURE OF BUSINESS ACTIVITIES AND MODUS OPERANDI OF THE ASSES SEE HAS ALSO REMAINED THE SAME. IT IS FURTHER NOTEWORTHY TH AT IN ASSESSMENT YEAR 2004-05 AND 2005-06, THE LD. CIT(A) HAS ALSO GIVEN DUE CREDIT TO THE CHANGE IN FACTS AND CIRCUMSTANCES BY ADOPTING A RATE OF 6% AS AGAINST 6 .5 % ADOPTED IN ASSESSMENT YEAR 1999-2000 TO 2001-02. WE FURTHER FIND THAT THE ASSESSING OFFICER HAS NOT BRO UGHT ANY MATERIAL ON RECORD TO JUSTIFY THE RATE OF 8 % FOR C OMPUTING NET PROFIT BEFORE SALARY AND INTEREST TO PARTNERS E XCEPT POINTING OUT CERTAIN DEFECTS. AS REGARD THE FACT TH AT MAJORITY OF THE PAYMENT HAD BEEN MADE IN CASH IS CONCERNED I N OUR OPINION, THAT BY ITSELF, CANNOT BE A CONCLUSIVE FAC TOR FOR ENHANCING THE RATE OF NET PROFIT IN THIS MANNER, PA RTICULARLY WHEN IN THE LINE OF THE ASSESSEES BUSINESS, CASH P AYMENT ARE A BUSINESS NECESSITY. WE ARE FURTHER OF THE VIEW TH AT THE PROVISIONS OF SECTION 44AD ARE NOT APPLICABLE, IN V IEW OF THE FACT THAT ASSESSEES TURNOVER IS MUCH HIGHER THAN T HE TURNOVER PRESCRIBED THEREIN, HENCE, THE RATE OF 8 % , THOUGH THE AO HAS NOT APPLIED THE PROVISIONS OF SECTION 44 AD, IS NOT JUSTIFIED HAVING REGARD TO THIS LEGAL POSITION EVEN. THUS, TAKING INTO CONSIDERATION ENTIRE FACTS AND CIRCUMST ANCES, WE HOLD THAT THE ORDER OF THE LD. CIT (A) IS CORRECT I N LAW. ACCORDINGLY, THE RELEVANT GROUNDS IN REVENUES APPE ALS FOR A.Y. 2004-05 AND 2005-06 ARE DISMISSED. FURTHER, GR OUND NO.1 OF ASSESSEES APPEALS IN I.T.A.NO.215/IND/08 A ND 216/IND/08 IS ALSO DISMISSED. 4. IN THE IMPUGNED APPEALS, THE REVENUE HAS CHALLEN GED THE RESTRICTION OF ADDITION ON ACCOUNT OF SUPPRESSION O F NET PROFIT AND APPLICATION OF NET PROFIT OF 6% IN PLACE OF 8% APPLIED BY THE ASSESSING OFFICER WHEREAS THE ONLY GROUND AGITATED/ ARGUED BY 10 THE ASSESSEE IS ESTIMATION OF NET PROFIT @6% ON THE PLEA THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS CONTRAR Y TO THE FACTS. HOWEVER, THE REMAINING GROUNDS WERE NOT ARGU ED BY THE ASSESSEE. SINCE THE IMPUGNED ISSUE HAS ALREADY BEEN DECIDED BY THE TRIBUNAL BY ACCEPTING THE NET PROFIT RATE @6 %, THEREFORE, IN THE ABSENCE OF ANY CONTRARY FACTS/DECISION, WE D ISMISS THE APPEAL OF THE ASSESSEE AS WELL AS OF THE REVENUE. FINALLY, THE APPEAL OF ASSESSEE AS WELL AS OF REVE NUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LEARNED REPRESENTATIVES FROM BOTH THE SIDES AT THE CONCLUSION OF HEARING ON 13 TH JUNE, 2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13.6.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE !VYAS!