M/S PRADEEP KUMAR CONTRACTOR, JHUNJHUNU V. ASSISTANT COMMISSIONER OF INCOME TAX, JHUNJHUNU

ITA 374/JPR/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7778 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 21-03-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K C GUPTA J DHK

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH A , JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE : SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 374/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2014-15 SHRI PRADEEP KUMAR CONTRACTOR MOROLIA MENSION, STATION ROAD JHUNJHUNU CUKE VS. THE ACIT CIRCLE- JHUNJHUNU JHUNJHUNU LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAGFP 9445 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL, CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI K.C. GUPTA, JCIT-DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 02/12/2019 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 09 /01/2020 VKNS'K@ ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF LD. CIT(A)-3, JAIPUR DATED 07-02-2018 FOR THE ASSESSME NT YEAR 2014-15. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ACTION OF AO IN INVOKING THE PROVISIONS OF SECTION 145(3) AND THEREBY REJECTING BOOKS OF ACCOUNTS. APPELLANT PRAYS ITA NO.374/JP/2018 M/S. PRADEEP KUMAR CONTRACTOR VS ACIT, CIRC LE - JHUNJHUNU 2 BOOKS OF ACCOUNTS OF ASSESSEE ARE DULY AUDITED WITH OUT ANY ADVERSE REMARKS AND DESERVES TO BE ACCEPTED AS SUCH . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING ADHOC DISALLOWANCE OF RS . 25,00,000/- ARBITRARILY AND BY COMPLETING IGNORING THE SUBMISSION MADE AND EVIDENCES ADDUCED. 2.1. THAT THE LOWER AUTHORITIES HAS FURTHER ERRED I N CONFIRMING THE ADDITION BY GROSSLY IGNORING THE FAC T THAT NEW WORK AWARDED WERE MUCH BELOW THE TENDER PRICE WHICH HAS RESULTED INTO FALL IN G.P., THUS THE REASON FOR LOW G.P. BEING FULLY SUBSTANTIATE THE CONSEQUENT ADDITION DESERVES TO BE DELETED. 2.1 AT THE TIME OF HEARING, THE LD.AR OF THE ASSESS EE STATED AT BAR THAT HE DOES NOT WANT TO PRESS THE GROUND NO. 1 OF THE A PPEAL AND THE SAME MAY BE DISMISSED AS NOT PRESSED FOR WHICH THE LD. D R HAS NO OBJECTION. HENCE, THE GROUND NO. 1 OF THE ASSESSEE IS DISMISSE D BEING NOT PRESSED BY THE LD.AR OF THE ASSESSEE. 3.1 THE GROUND NO. 2 AND 2.1 OF THE ASSESSEE ARE RE GARDING AN ADDITION OF RS. 25.00 LACS MADE BY THE AO AND CONFIRMED BY T HE LD. CIT(A). 3.2 THE ASSESSEE IS A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF EXECUTION OF CIVIL WORK MAINLY AWARDED BY THE STATE GOVT. DEPARTMENT. THE AO NOTED THAT DURING THE YEAR UNDER CONSIDERATI ON THE ASSESSEE HAS DECLARED THE G.P. OF 14.04% WHICH IS LESS THAN THE G.P. DECLARED BY THE IN ITA NO.374/JP/2018 M/S. PRADEEP KUMAR CONTRACTOR VS ACIT, CIRC LE - JHUNJHUNU 3 THE IMMEDIATELY PRECEDING YEAR AT 18.15%. THE AO FO UND THAT THERE IS A SUBSTANTIAL DECREASE IN THE G.P. RATE AS WELL AS N. P. RATE DECLARED BY THE ASSESSEE. THE AO ACCORDINGLY CALLED FOR NECESSARY D ETAILS AND EXAMINED THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED BY THE AO BY INVOKING THE PR OVISIONS OF SECTION 145(3) OF THE ACT. AFTER REJECTION OF BOOKS OF ACCO UNT OF THE ASSESSEE, THE AO MADE A LUMPSUM ADDITION OF RS. 25.00 LACS TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE ACTION OF TH E AO BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. 3.3 BEFORE US, THE LD.AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS DULY EXPLAINED THE REASONS FOR DECLINE IN G.P. FOR THE YEAR UNDER CONSIDERATION AS ASSESSEE HAS BEEN AWARDED THREE CO NTRACT WORKS BY THE RAJASTHAN STATE GOVT. DEPARTMENT AT BELOW B.S.R. RA TE. THE ASSESSEE TOOK THESE WORKS TO EXECUTE IN ORDER TO USE THE IDL E MACHINE AND MANPOWER. THEREFORE, IT IS DUE TO THE SPECIFIC CIRC UMSTANCES WHERE THE ASSESSEE HAS TAKEN UP THE WORK AWARDED BY THE STATE GOVT. DEPTT. THE WORK HAS BEEN AWARDED THROUGH OPEN TENDER SYSTEM AN D THE FACT THAT IT HAS BEEN AWARDED AT A PRICE WHICH IS LOWER THAN THE TENDER PRICE BASED ON ITA NO.374/JP/2018 M/S. PRADEEP KUMAR CONTRACTOR VS ACIT, CIRC LE - JHUNJHUNU 4 BSR RATE PRESCRIBED AT STATE PWD DEPARTMENT FOR EXE CUTION OF WORK. THE LD.AR OF THE ASSESSEE FURTHER CONTENDED THAT TH E TURNOVER OF THE ASSESSEE HAS BEEN INCREASED AS COMPARED TO PRECEDIN G YEAR. THEREFORE, TO ACHIEVE THE HIGHER TURNOVER, LOWER PROFIT MARGIN WA S BOUND TO HAPPEN. THE LD.AR OF ASSESSEE HAS REFERRED TO THE DETAILS O F FOUR CONTRACT WORKS AWARDED TO THE ASSESSEE BY PWD DEPARTMENT AND SUBMI TTED THAT THESE FOUR CONTRACT WORKS WERE AWARDED AT BELOW BSR RATE RANGING FROM BELOW 10.11% TO 3.53%. IN SUPPORT OF HIS CONTENTION S, THE LD.AR OF THE ASSESSEE RELIED ON THE DECISION OF HON'BLE RAJASTHA N HIGH COURT IN THE CASE OF CIT VS M/S. GOTAN LIME KHANIJ UDYHOG, 256 I TR 243 (RAJ) AND SUBMITTED THAT HON'BLE HIGH COURT HELD THAT THE REJECTION OF BOOKS OF ACCOUNT U/S 145(3) DOES NOT ALWAYS LEAD TO AN ADDIT ION IN EVERY SUCH CIRCUMSTANCES, EVEN IF THERE IS FALL IN THE G.P. RA TIO AS SUCH. THE LD.AR FURTHER SUBMITTED THAT EACH ASSESSMENT YEAR IS DIFF ERENT AND DUE TO MARKET FORCES TRADING RESULTS OF THE ASSESSEE ARE B OUND TO CHANGE. ONCE THE ASSESSEE HAS EXPLAINED THE REASONS FOR FALL IN G.P. RATE WITH NECESSARY EVIDENCES THEN IT IS NOT EXPECTED THAT THE ASSESSEE SHOULD MAINTAIN THE SAME G.P. RATE AS IN THE PRECEDING YEAR. THE LD.AR OF THE ASSESSEE ITA NO.374/JP/2018 M/S. PRADEEP KUMAR CONTRACTOR VS ACIT, CIRC LE - JHUNJHUNU 5 SUBMITTED THE ADDITION MADE BY THE AO IS NOT JUSTIF IED AND THE SAME MAY BE DELETED. 3.4 ON THE OTHER HAND, LD. DR SUBMITTED THAT THE AO FOUND VARIOUS DISCREPANCIES IN THE BOOKS OF ACCOUNT OF THE ASSESS EE AS RECORDED IN PARA 3 OF THE ASSESSMENT ORDER. THEREFORE, THE BOOKS OF AC COUNT OF THE ASSESSEE DID NOT REVEAL THE TRUE AND CORRECT STATE OF AFFAIR S AND CONSEQUENTLY THE AO REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. O NCE THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE REJECTED THEN THE INCOM E OF THE ASSESSEE HAS TO BE ESTIMATED BY TAKING THE APPROPRIATE G.P. RATE. T HE AO HAS THUS MADE THE ADDITION OF RS. 25.00 LACS WHICH IS LESS THAN T HE ADDITION AS WOULD HAVE BEEN MADE IF THE AVERAGE G.P. OF PRECEDING YEA R IS TAKEN AS BASIS. THE LD. DR SUBMITTED THAT THOUGH THE AO HAS MADE LU MPSUM ADDITION, HOWEVER, THE SAME IS NOT EXCESSIVE OR ARBITRARY IF THE FACTS AND CIRCUMSTANCES OF THE CASE ARE TAKEN INTO CONSIDERAT ION. THE LD. DR THUS RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 3.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIALS AVAILABLE ON RECORD. THE ASSESSEE HAS NOT PRESSED THE GROUND NO. 1 REGARDING THE REJECTION OF BOOKS OF ACCOUNT. THEREFORE, THE ISSUE OF REJECTION OF BOOKS OF ACCOUNT HAS ATTAINED FINALITY . ONCE THE BOOKS OF ITA NO.374/JP/2018 M/S. PRADEEP KUMAR CONTRACTOR VS ACIT, CIRC LE - JHUNJHUNU 6 ACCOUNT OF THE ASSESSEE ARE REJECTED BY THE AO THEN THE ONLY OPTION IS LEFT WITH THE AO TO FRAME THE ASSESSMENT BASED ON BEST J UDGEMENT U/S 145(3) R.W.S. 144 OF THE ACT. IT IS A SETTLED PRINCIPLE OF LAW THAT ESTIMATION OF INCOME AFTER REJECTION OF BOOKS OF ACCOUNT SHOULD B E BASED ON PROPER AND REASONABLE CRITERIA AND PAST HISTORY OF THE G.P. DE CLARED BY THE ASSESSEE IS REASONABLE GUIDANCE FOR ESTIMATION OF INCOME. IN TH E CASE IN HAND, THERE IS NO DISPUTE THAT ASSESSEE HAS DECLARED THE G.P. AT 1 4.04% IN COMPARISON TO THE G.P. RATE FOR A.Y. 2012-13 AT 18.63% AND FOR A. Y. 2013-14 AT 18.15%. THEREFORE, THE AVERAGE OF PRECEDING TWO YEARS G.P. RATE DECLARED BY THE ASSESSEE COMES TO 18.39%. THE ASSESSEE HAS EXPLAINE D THE REASONS FOR DECLINE IN G.P. RATE THAT SOME OF THE CONTRACTS AWA RDED DURING THE YEAR UNDER CONSIDERATION ARE BELOW BSR RATE. WE FIND THA T IF THIS FACT IS CONSIDERED FOR GIVING AN APPROPRIATE REBATE IN THE G.P. RATE DECLARED BY THE ASSESSEE THEN THE ESTIMATION OF INCOME HAS TO BE BA SED ON SOME REASONABLE AND PROPER CRITERIA BEING G.P. RATE DECL ARED IN THE PRECEDING YEARS. IF THE SIMPLE AVERAGE OF G.P. RATE OF PRECED ING YEAR IS TAKEN INTO CONSIDERATION BEING 18.39% THEN THE INCOME FOR THE YEAR UNDER CONSIDERATION HAS TO BE ESTIMATED BASED ON THE PAST HISTORY OF ASSESSEE'S G.P. RESULTING INTO ADDITION OF ABOUT RS. 1.50 CROR ES. THE AO AFTER ITA NO.374/JP/2018 M/S. PRADEEP KUMAR CONTRACTOR VS ACIT, CIRC LE - JHUNJHUNU 7 CONSIDERING ALL THESE FACTS HAS MADE ONLY AN ADDITI ON OF RS. 25.00 LACS WHICH IS VERY MEAGER. THEREFORE, WHEN THE AO HAS AL READY GIVEN THE BENEFIT OF ALL THESE FACTS EXPLAINED BY THE ASSESSE E AND DISCOUNTED THE G.P. FOR ESTIMATION OF INCOME THEN IN THE FACTS AND CIRC UMSTANCES OF THE CASE, WE DO NOT FIND ANY ERROR OR ILLEGALITY AND CONSEQUE NTIAL INTERFERENCE IN THE IMPUGNED ORDER OF THE LD. CIT(A). THUS GROUND NO. 2 AND 2.1 OF THE ASSESSEE ARE DISMISSED. 4.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 09 /01/ 2020. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 09/01/ 2020 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI PRADEEP KUMAR CONTRACTOR, JHUN JHUNU 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE - JHUNJHUNU 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.374/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR