Sh. Jugendra Singh Yadav, Agra V. ACIT, Agra

ITA 388/AGR/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7189 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 18-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K K JAIN
• Keywords: Depreciation; Period of limitation; Reasonable cause
• Section: 142(1)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI LALIET KUMAR, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER ITA NOS. 388 & 389/AGR/2018 ASSESSMENT YEARS: 2013-14 & 2014-15 JOGENDRA SINGH YADAV, KUA KHERA, KALAL KHERIA, FATEHABAD ROAD, AGRA PAN-AZHPS7182F (APPELLANT) VS. ACIT, CIRCLE 1(1)(1), AGRA. (RESPONDENT) APPELLANT BY SH. K.K. JAIN, ADVOCATE RESPONDENT BY SH. WASEEM ARSHAD, SR. DR ORDER PER LALIET KUMAR, J.M.: THESE TWO APPEALS FOR THE ASSESSMENT YEARS 2013-1 4 AND 2014-15 ARE FILED BY THE ASSESSEE BEING AGGRIEVED BY THE ORDERS OF TH E LD. CIT(A). THE ISSUE INVOLVED AND THE GROUNDS RAISED IN BOTH THE APPEALS ARE COMM ON. THE GROUNDS RAISED IN APPEAL FOR A.Y. 2013-14 ARE AS UNDER : 1. BECAUSE THE BOOKS OF ACCOUNT OF THE APPELLANT WE RE DULY AUDITED U/S 44AB AND THE AUDIT REPORT WAS DULY SUBMITTED BEFORE THE AO, THE APPLICATION OF NET PROFIT PERCENTAGE OF 8% BY INVOKING THE PROVISIONS OF SECT ION 145(3) IS WRONG AND UNWARRANTED. 2. BECAUSE IN THE ABSENCE OF ANY ERROR OR OMISSION IN THE REGULARLY KEPT BOOKS OF ACCOUNT, THE CIT(A) ERRED IN CONFIRMING ITS REJECTIO N SIMPLY FOR NON MAINTENANCE OF STOCK REGISTER AND INADEQUACY OF BILLS AND VOUCH ERS WHICH BY ITSELF WOULD NOT BE SUFFICIENT TO HOLD THAT TRUE PROFITS OF THE BUSI NESS CANNOT BE ASCERTAINED. DATE OF HEARING 19.07.2019 DATE OF PRONOUNCEMENT 30 .07.2019 ITA NOS. 388 & 389/AGR/2018 2 3. BECAUSE THE APPELLANT, A CIVIL CONTRACTOR, HAD T O INCUR INCUMBENT EXPENDITURE OVER BUILDING MATERIAL, WAGES ETC WITHOUT WHICH THE WORK COULD NOT BE EXECUTED. IN THE ABSENCE OF AVAILABILITY OF COMPLETE VOUCHERS , THE COMPARABLE REASONABLENESS OF PERCENTAGE OF EXPENDITURE OVER RE CEIPTS OUGHT TO HAVE BEEN CONSIDERED GIVING DUE MARGIN FOR ESCALATION OF PRIC ES. 4. BECAUSE THE CIT(A) HAS ERRED IN DISREGARDING THE PAST HISTORY OF THE CASE WHICH IS RELEVANT FOR COMPUTATION OF INCOME EVEN IF THE BOOKS OF ACCOUNT ARE REJECTED AND NET PROFIT RATE IS APPLIED. COMPARABLE CASES DESERVE TO BE CONSIDERED IN SUCH CIRCUMSTANCES. 5. BECAUSE THE LD.CIT(A) ERRED IN NOT APPRECIATING T HE DECISIONS CITED BEFORE HIM TO SUPPORT THE APPELLANT'S CASE. 6. BECAUSE THE LD.CIT(A) HAS ERRED IN OBSERVING THAT THE APPELLANT HAS ACCEPTED THE INVOCATION OF PROVISIONS OF SECTION 145(3) AND APPLICATION OF NET PROFIT RATE AT 8% IN PRECEDING YEARS. 7. BECAUSE THE ADDITION OF RS.13,65,613/- CO NFIRMED BY CIT(A), OUGHT TO HAVE BEEN DELETED AND/OR MODIFIED CONSIDERING THE FACTS OF THE CASE. 2. THE ABOVE TWO APPEALS WERE FILED BY THE ASSESSEE DELAYED BY 10 DAYS, FOR WHICH THE ASSESSEE HAS FILED CONDONATION APPLICATIO NS, STATING THAT A NOTICE U/S. 142(1) FOR A.Y. 2016-17 WAS SENT BY AO ON 20.03.201 8 AND THE IMPUGNED ORDERS WERE ALSO UPLOADED FROM THE OFFICE OF LD. CIT(A) SH OWING THE DATE OF UPLOADING AS 09.03.2018 ON THE WEB MAIL OF ASSESSEES AUDITORS M /S. ANKUR JAIN & CO. DESPITE THE ATTENDING ADVOCATE SHRI K.K. JAIN HAD GIVEN HIS WEB MAIL ON FORM NO. 35. IT IS SUBMITTED THAT OWING TO MISCOMMUNICATION OF THE DAT E OF RECEIPT OF IMPUGNED ORDERS AS 20.03.2018 INSTEAD OF 09.03.2018, THE APP EALS COULD BE FILED WITH A DELAY OF 10 DAYS. IN SUPPORT, AN AFFIDAVIT OF SHRI MAHESH KUMAR GARG, PARTNER OF THE ITA NOS. 388 & 389/AGR/2018 3 AUDITOR FIRM IS PLACED ON RECORD, WHICH STANDS UNCO NTROVERTED ON BEHALF OF THE REVENUE. WE, THEREFORE, CONDONE THE NOMINAL DELAY O F 10 DAYS OCCURRED IN FILING THE APPEALS, AS THERE WAS REASONABLE CAUSE, WHICH PREVE NTED THE ASSESSEE TO FILE THE SAME WITHIN THE PERIOD OF LIMITATION. 3. THE BRIEF FACTS OF THE CASES ARE THAT THE ASSESS EE IS A CIVIL CONTRACTOR ENGAGED IN EXECUTING WORKS CONTRACT FOR AGRA DEVELOPMENT AU THORITY, MATHURA VRINDAVAN DEVELOPMENT AUTHORITY ETC. THE ASSESSEE HAD DECLARE D NET PROFITS OF RS.25,50,231/- AND RS.49,09,822/-, GIVING NP RATES OF 5.09% & 5.13 % RESPECTIVELY FOR A. YRS. 2013- 14 AND 2014-15 ON GROSS RECEIPTS OF RS. 5,00,21,444 /- AND RS.9,56,99,497/- RESPECTIVELY INCLUSIVE OF VAT. THE ASSESSING OFFICE R APPLIED THE NET PROFIT RATE OF 8% ON THE CONTRACT RECEIPTS AFTER REJECTING THE BOOKS OF ACCOUNT U/S. 145(3) OF THE ACT. 3.1. THE CASE OF THE ASSESSEE WAS THAT THE PROVISIO NS OF SECTION 145(3) WERE NOT APPLICABLE WITHOUT POINTING OUT ANY DEFECTS IN THE AUDITED BOOKS OF ACCOUNTS AND THAT THE EXPENDITURE INCURRED IS SUPPORTED BY SELF MADE VOUCHERS. THE ASSESSEE HAD ALSO SUBMITTED COMPARATIVE RATES OF VARIOUS RAW MAT ERIALS AND LABOR TO SUPPORT THE NET PROFIT RATE DECLARED BY IT. ITA NOS. 388 & 389/AGR/2018 4 3.2 THE ASSESSING OFFICER WAS NOT CONVINCED BY THE REPLY OF ASSESSEE AND AFTER RESORTING TO THE PROVISIONS OF SECTION 145(3), HE R EJECTED THE BOOK VERSION OF THE ASSESSEE ON THE PREMISE THAT THE ASSESSEE DID NOT K EEP ADEQUATE VOUCHERS FOR EXPENSES INCURRED IN CASH AND THAT THE SELF MADE VO UCHERS WERE NOT OPEN FOR VERIFICATION AND NON-MAINTENANCE OF STOCK REGISTER. THE ASSESSING OFFICER APPLIED THE NET PROFIT RATE OF 8% ON THE CONTRACT RECEIPTS OF RS. 4,89,48,054/- AND RS.9,19,34,759/- RESPECTIVELY AFTER REDUCING VAT FR OM THE GROSS RECEIPTS. THUS, THE AO DETERMINED THE NET PROFITS OF RS.39,15,844/- AND RS.73,54,781/- FOR A.YRS. 2013- 14 AND 2014-15, THEREBY MAKING ADDITIONS OF RS.13,6 5,613/- AND RS.24,44,959/- RESPECTIVELY. 3.3. FEELING AGGRIEVED BY THE ADDITIONS MADE BY TH E ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEALS BEFORE THE LD. CIT(A), WHO CONFIR MED THE ACTION OF THE ASSESSING OFFICER VIDE IMPUGNED ORDERS. NOW, FEELING AGGRIEVE D BY THE ORDERS OF LD. CIT(A), THE ASSESSEE IS IN APPEALS BEFORE US. 4. BEFORE US, THE LEARNED AR OF THE ASSESSEE SUBMIT TED THAT WHERE THE BOOKS ARE REJECTED U/S 145(3), IT WAS INCUMBENT UPON THE AUTH ORITIES BELOW TO DETERMINE THE LOGICAL PROFIT BASED ON SOME MATERIAL ON RECORD. TH E NET PROFIT RATE DETERMINED BY THE AUTHORITIES BELOW NEITHER COMMENSURATE TO ASSES SEES OWN PAST HISTORY NOR ITA NOS. 388 & 389/AGR/2018 5 BASED ON ANY COMPARABLE CASE OF IDENTICAL BUSINESS ACTIVITIES. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO GIVEN A CHART SHOWING COMPARABLE FIGURES OF ASSESSEES OWN CASES TO THE FOLLOWING EFFECT : ASSESSMENT YEAR GROSS RECEIPTS NET PROFIT RATE SHOWN BY THE APPELLANT RATE APPLIED BY HON'BLE ITAT AGRA BENCH 2012-13 4,55,02,047 22,99,020 5.05% 5.25% IN ITA NO.111/AGRA/2017 AND CORRIGENDUM 2013-14 5,00,21,444 25,50,021 5.09% YEAR UNDER APPEAL 2014-15 9,56,99,497 49,09,822 5.13% YEAR UNDER APPEAL THE LD. AR HAS ALSO GIVEN THE INSTANCES OF OTHER CO NTRACTORS RESULTS TO THE FOLLOWING EFFECT : ITA NO ASSTT.YEAR NAME RATE SHOWN RECEIPTS RATE FINALLY APPLIED BY ITAT 368/AGRA/2013 2010-11 OM CONSTRUCTION CO VS JCIT 2.49 8.89 CRORES 4% 266/AGRA/2011 2004-05 ITO VS ATUL CONSTRUCTION CO. MATHURA 1,44% 3.35 CRORES 2% 567/AGRA/2012 2009-10 NARESH KATARE VS ACIT 1.53% 13.54 CRORES 3% 2673/DEL/2012 2006-07 ACIT VS SK SHARMA CONTRACTOR 4.17% 13.5 CRORES 4.17% IT IS FURTHER SUBMITTED THAT IN VIEW OF THE DECISIO N OF CO-ORDINATE BENCH FOR A.Y. 2012-13 IN ASSESSEES OWN CASE IN THE IDENTICAL FAC TS AND CIRCUMSTANCES, THE NET PROFIT RATE OF 8% ASSESSED BY THE AUTHORITIES BELO W IS NOT SUSTAINABLE. ITA NOS. 388 & 389/AGR/2018 6 5. THE LD. DR, ON THE OTHER HAND, OPPOSED THE CONTE NTIONS MADE BY THE LD. AR AND SUBMITTED THAT THE EXPENDITURES WERE MADE IN CASH A ND THE SELF MADE VOUCHERS WERE NOT OPEN FOR VERIFICATION. THEREFORE, THE LD. AUTHORITIES BELOW WERE JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS AND APPLYING THE NE T PROFIT RATE OF 8% ON THE CONTRACT RECEIPTS. HE URGED FOR SUSTENANCE OF THE I MPUGNED ORDER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IT IS WORTHWHILE TO NOTE HERE THAT THE BEST JUDGMENT ASSESSMENT EVEN AFTER REJECTION OF BOOKS OF ACCOUNT CANNOT BE USED AS A TOOL TO HARASS ANY TAX PAYER. IN FACT, THE BEST JUDGMENT ASSESSMENT CANNOT BE MADE ON THE BASIS OF WHIMS AND FANCIES, BUT IT MUST HAVE SOME REASONABLE NEXUS TO THE AVAILABLE MATERIAL ON RECORD AND ATTENDING CIRCUMSTANCES OF THE CASE, WHICH IS LACKING IN THE PRESENT CASE. THE LD. AUTHORITIES BELOW WHILE ADOPTING THE PROFIT RATE OF 8% HAVE NEI THER TAKEN INTO ACCOUNT THE PAST HISTORY OF ASSESSEE NOR THIS PROFIT RATE WAS SUPPOR TED BY ANY COMPARABLE INSTANCE OR ANY OTHER MATERIAL AVAILABLE ON RECORD. IT IS ALSO BORN OUT ON RECORD THAT THE COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF A SSESSEE ITSELF FOR PRECEDING ASSESSMENT YEAR 2012-13 HAD APPLIED THE NET PROFIT RATE OF 5.25% IN THE IDENTICAL FACTS AND CIRCUMSTANCES OF THE CASE. KEEPING IN VI EW THE PAST HISTORY OF THE ASSESSEE, COMPARABLE INSTANCES AS SUBMITTED BY THE LD. AR AND THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR P RECEDING ASSESSMENT YEAR 2012- ITA NOS. 388 & 389/AGR/2018 7 13, WE ARE OF THE OPINION THAT THE PROFIT RATE OF 8% ADOPTED BY BOTH THE AUTHORITIES BELOW IS NOT REASONABLE. CONSIDERING THE TOTALITY O F FACTS AND CIRCUMSTANCES AND THE MATERIAL AVAILABLE ON RECORD, WE, THEREFORE, THINK IT APPROPRIATE TO ESTIMATE THE NET PROFIT RATE OF 5.25% ON THE CONTRACT RECEIPTS IN BO TH THE CASES, AS DONE BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2012-13. T HE ASSESSEE IS GIVEN RELIEF ACCORDINGLY. 7. IN APPEAL FOR A.Y. 2014-15, THE ASSESSEE HAS TAK EN ONE MORE GROUND THAT THE LD. CIT(A) HAS ERRED IN NOT ALLOWING DEPRECIATION C LAIMED AT RS.17,69,805/-. ONCE, THE INCOME OF THE ASSESSEE IS ASSESSED AFTER ESTIMA TING THE NET PROFIT RATE, THIS GROUND OF APPEAL DOES NOT HOLD GOOD AND IS REQUIRED TO BE DISMISSED. 8. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DR. MITHA LAL MEENA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA