A.C.I.T., Circle-1, Gwalior V. M/s Gour Bandhu Construction Co., Tikamgarh

ITA 389/AGR/2011

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0411 (ITAT-AGRA)
• Duration Of Justice: 7 year(s) 7 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-02-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 07-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Keywords: Business income; Assessment record
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 389/AGRA/2011 ASSTT. YEAR : 2007-08 A.C.I.T., CIRCLE-1, VS. M/S. GOUR BANDHU CONSTR UCTION CO. GWALIOR. OPP. POLICE STATION, JATARA, DISTT. TIKAMGARH. (PAN : AAEFG 5547 Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.K. MISHRA, JR. D.R. RESPONDENT BY : SHRI RAJENDRA SHARMA, ADVOCATE DATE OF HEARING : 07.02.2013 DATE OF PRONOUNCEMENT OF ORDER : 08.02.2013 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), GWALIOR DATED 21.07.2011 FOR THE ASSESSMENT YEAR 20 07-08, CHALLENGING THE ORDER OF THE LD. CIT(A) IN ACCEPTING THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND DELETING THE ADDITION OF NET PROFIT TO THE EXTENT O F RS.30,96,,161/-. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME DECLARING PROFIT OF RS.11,98,530/- FROM THE CONTRAC T RECEIPTS OF RS.6,91,09,659/-. ITA NO. 389/AGRA/2011 2 THE AO ESTIMATED NET PROFIT AT THE RATE OF 8% OF TO TAL RECEIPTS AFTER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE ON THE BASIS OF DE FECTS POINTED OUT IN THE ASSESSMENT ORDER. ACCORDINGLY, INCOME HAS BEEN COMP UTED AT RS.44,94,691/- AFTER ALLOWING INTEREST AND SALARY PAID TO THE PARTNERS. THE ASSESSEE CHALLENGED THE REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF PRO FITS BY APPLYING THE PROFIT RATE OF 8% BEFORE THE LD. CIT(A). THE WRITTEN SUBMISSION OF THE ASSESSEE IS INCORPORATED IN THE APPELLATE ORDER IN WHICH THE AS SESSEE BRIEFLY EXPLAINED THAT THE AO HAS NOTED THAT FEW OF THE PURCHASES MADE ON CHAL LANS OR BILLS ARE NOT PRINTED OR THE PARTIES ARE NOT REGISTERED WITH THE SALES TAX D EPARTMENT. IT WAS SUBMITTED THAT THE ASSESSEE MADE PURCHASES AMOUNTING TO RS.3,76,55 ,904/- AND THE ASSESSEE PRODUCED ALL SUPPORTING BILLS AND PURCHASES HAVE BE EN MADE FROM DIFFERENT PARTIES AND SOME OF THE PARTIES ARE NOT REGISTERED WITH THE COMMERCIAL TAX DEPARTMENT. IN THE LINE OF ROAD CONSTRUCTION, IT IS A KNOWN FACT T HAT HAND BROKEN GRITS ARE PURCHASED THROUGH BELDARS. THEREFORE, REJECTION OF THE BOOKS IS NOT JUSTIFIED. SINCE IN THIS CIVIL CONSTRUCTION OF ROADS, MANY SUPPLIERS ARE NOT REGISTERED AND IT IS NOT FINANCIALLY VIABLE TO MAKE PURCHASE FROM DISTANT PL ACES, THEREFORE, THE PURCHASES ARE MADE AT THE SPOT ALSO AND THE PURCHASES INCLUDE OF GRITS, BITUMEN, DIESEL/OIL, CEMENT, PIPES, TRANSPORTATION EXPENSES, SUB-CONTRAC T ETC. THE PURCHASES ARE MADE AGAINST THE BILLS, BUT SOME OF THE BILLS WERE NOT P RINTED WHICH COMES TO ITA NO. 389/AGRA/2011 3 RS.4,65,726/- ONLY, WHICH MEANS 4.44% OF PURCHASE O F GRIT AND IN TERMS OF TOTAL PURCHASES, THE SAME IS ONLY 1.23%. THEREFORE, HUGE ADDITION IS UNJUSTIFIED. IT WAS SUBMITTED THAT REJECTION OF BOOKS OF ACCOUNT IN SUC H CIRCUMSTANCES IS UNJUSTIFIED. THE PROFIT RATE APPLIED AT THE RATE OF 8% AS PER SE CTION 44AD IS UNJUSTIFIED BECAUSE THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUN T, WHICH ARE AUDITED AND SUCH PROVISIONS ARE APPLICABLE WHEN NO BOOKS OF ACCOUNT ARE MAINTAINED AND BEING SPECIAL PROVISION, PROFIT IS ESTIMATED AT THE RATE OF 8%. THE LD. CIT(A), CONSIDERING THE MATERIAL ON RECORD AND IN THE LIGHT OF SUBMISSI ONS OF THE ASSESSEE, DELETED THE SUBSTANTIAL ADDITION AND ALLOWED THE APPEAL OF THE ASSESSEE PARTLY. THE FINDINGS OF THE LD. CIT(A) IN PARA 4 & 5 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 4 . APPELLANTS SUBMISSIONS ALONGWITH ASSESSMENT ORDER HAVE BEEN CONSIDERED CAREFULLY. ASSESSMENT RECORDS HAVE ALSO BEEN PERUSED. THE APPELLANT IS A CONTRACTOR & ENGAGED IN ROAD CONSTRUCTION BUSINESS. TO EARN CONTRACTUAL RECEIPTS OF RS.6,91,09,659/-, THE APPELLANT HAS MADE MATERIAL P URCHASES OF RS.3,76,55,904/-. A.O. HAS REJECTED AUDITED BOOKS O F ACCOUNTS OF THE APPELLANT MAINLY FOR NON PRODUCTION OF BILLS OR PRO DUCTION OF KACHHA BILLS FOR PURCHASE OF GRIT ON VARIOUS DATES. TOTAL GRIT PURCHASED DURING THE YEAR UNDER CONSIDERATION IS RS.1,04,70,706/- OU T OF WHICH A.O. HAS POINTED OUT ABOVE MENTIONED DEFECTS IN RESPECT OF R S.4,65,726/- AS PER THE ASSESSMENT ORDER. DURING THE COURSE OF APPEAL P ROCEEDINGS, THESE CHALLANS & KACHHA BILLS HAVE ALSO BEEN PERUSED. ALL THE CHALLANS ARE FOUND DULY REFLECTED IN CASH BOOK & LEDGER OF THE A PPELLANT WHEREAS FEW KACHHA BILLS ARE NOT SHOWN IN THE CASH BOOK THO UGH ACCOUNTED FOR IN THE LEDGER. KEEPING IN VIEW THE NATURE & TURNOVE R OF THE BUSINESS OF THE APPELLANT COUPLED WITH THE FACT OF PARTNER, VIZ . SHRI B.K. JAIN ITA NO. 389/AGRA/2011 4 ADMISSION MADE DURING THE COURSE OF ASSESSMENT PROC EEDINGS VIDE ORDER SHEET ENTRY DTD. 30.07.2009 THAT ALL THE BILL S AND VOUCHERS ARE NOT MAINTAINED KEEPING IN VIEW TOUGH WORKING CONDIT IONS AT REMOTE SITE AND NATURE OF BUSINESS, IT IS NOT PRACTICABLE TO MAINTAIN ALL THE RECORDS IN ITS BUSINESS AND, THEREFORE, A LENIENT V IEW BE TAKEN, AN AMOUNT OF RS.2,00,000/- AS DISALLOWANCE ON PURCHASE OF GRIT IS FOUND REASONABLE AND JUSTIFIED. FURTHER, A.O. HAS NOT GIV EN ANY BASIS FOR ESTIMATING THE NET PROFIT OF THE APPELLANT @ 8% OF RECEIPTS WITHOUT ANY BASIS. THE APPLICABILITY OF THE SAID ESTIMATE IS FO UND IN PROVISIONS OF SEC. 44AD OF THE I.T. ACT IN RESPECT OF CIVIL CONTR ACTORS, WHEN NO BOOKS OF ACCOUNTS ARE MAINTAINED BY THE APPELLANT. IN CASE UNDER APPEAL, THE APPELLANT HAS NOT ONLY MAINTAINED REGUL AR BOOKS OF ACCOUNTS, BUT THEY HAVE BEEN DULY AUDITED ALSO IN W HICH NO SPECIFIC DEFECT HAS BEEN FOUND EXCEPT FOR PURCHASE OF GRIT O N CHALLANS AND KACHCHA BILLS. DISALLOWANCE OF RS.2,00,000/- HAS AL READY BEEN CONFIRMED AS ABOVE. ACCORDINGLY, COMPUTATION OF APP ELLANTS BUSINESS INCOME AT RS.55,28,772/- MADE ON THE BASIS OF NET P ROFIT @ 8% ON TOTAL RECEIPTS OF RS.6,91,09,659/- IS, HEREBY, CANC ELLED. APPELLANTS TAXABLE INCOME IS ASSESSED AT RS.13,98,530/- ACCORD INGLY IN VIEW OF CONFIRMATION OF DISALLOWANCE OF EXPENSES AT RS.2,00 ,000/-. 5. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 3. THE LD. DR RELIED UPON THE ORDER OF THE AO AND A DMITTED THAT THE AO IN THE ASSESSMENT ORDER HAS GIVEN THE DETAILS OF DISCREPAN CIES WHERE EITHER NO BILLS WERE PRODUCED OR ONLY KACHCHA BILLS HAVE BEEN PRODUCED, BUT THE TOTAL OF THE DISCREPANCIES COMES TO RS.4,65,726/-, AS NOTED BY T HE LD. CIT(A) IN THE APPELLATE ORDER. ON THE OTHER HAND, THE LD. COUNSEL FOR THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. ITA NO. 389/AGRA/2011 5 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN DE LETING THE ADDITION. THE ASSESSEE IS CONTRACTOR AND ENGAGED IN THE ROAD CONSTRUCTION BUS INESS. THE ASSESSEE MAINTAINED REGULAR BOOKS OF ACCOUNT, WHICH ARE AUDITED ALSO. T HE ASSESSEE MADE PURCHASES FOR ABOUT RS. 3.76 CRORES IN ASSESSMENT YEAR UNDER APPE AL. THE BOOKS OF ACCOUNT WERE REJECTED FOR NON-PRODUCTION OF BILLS OR PRODUCTION OF KACHCHA BILLS FOR PURCHASE OF GRIT ON VARIOUS DATES, WHICH ARE MENTIONED IN THE A SSESSMENT ORDER. THE TOTAL GRIT PURCHASED BY THE ASSESSEE ARE IN A SUM OF RS.1,04,7 0,706/- AND THE DEFECTS POINTED OUT BY THE AO IN THE ASSESSMENT ORDER COMES TO RS.4 ,65,726/- ONLY. THE ASSESSEE PRODUCED ALL THE BILLS, WHICH WERE FOUND ENTERED IN TO THE BOOKS OF ACCOUNT. THE NATURE OF BUSINESS OF THE ASSESSEE CLEARLY PROVES T HAT EVEN SOMETIMES GRITS ARE PURCHASED FROM UN-ORGANIZED SECTORS, THEREFORE, PUK KA BILLS WOULD NOT BE ISSUED BY THE PARTIES BECAUSE THE PURCHASES ARE MADE FROM REM OTE AREAS ALSO. THE LD. CIT(A) WAS, THEREFORE, JUSTIFIED IN ESTIMATING SUCH DISALL OWANCE AT RS.2,00,000/- OUT OF THE DEFECTS POINTED OUT IN A SUM OF RS.4,65,726/-. THUS , THERE WAS NO JUSTIFICATION TO APPLY THE PROFIT RATE OF 8% FOR ESTIMATING THE PROF IT OF THE ASSESSEE. FOR MINOR DEFECTS POINTED OUT IN MAKING THE PURCHASE OF GRIT, THE HUGE ADDITION MADE BY THE AO IS NOT JUSTIFIED. IT IS WELL SETTLED LAW THAT EV EN IF BOOKS OF ACCOUNT OF THE ASSESSEE ARE NOT RELIABLE, THE PROFIT OF THE ASSESS EE SHALL HAVE TO BE ESTIMATED ON ITA NO. 389/AGRA/2011 6 REASONABLE BASIS CONSIDERING THE HISTORY OF THE ASS ESSEE AND THE PROFIT MARGIN. THE AO SHOULD NOT MAKE EXORBITANT ADDITION. CONSIDERING THE ABOVE DISCUSSION AND THE FACTS OF THE CASE, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN DELETING THE SUBSTANTIAL ADDITION. THE APPEAL OF TH E REVENUE HAS NO MERIT AND THE SAME IS, THEREFORE, DISMISSED. 5. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY