Narendra Prasad, Kanpur V. Income Tax Officer-3(3), Kanpur

ITA 4/LKW/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0568 (ITAT-LUCKNOW)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 05-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PUNIT KUMAR
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.04/LKW/2015 ASSESSMENT YEAR:2010-11 NARENDRA PRASAD HOUSE NO.6, O BLOCK, YASHODA NAGAR, KANPUR V. INCOME TAX OFFICER 3(3) KANPUR TAN/PAN:AHXPP2612E (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. RAKESH GARG, ADVOCATE RESPONDENT BY: SHRI. PUNIT KUMAR, D.R. DATE OF HEARING: 30 04 2015 DATE OF PRONOUNCEMENT: 12 06 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON THE FOLLOWING GROUNDS:- 1. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE FOLLOWING DISALLOWANCES, OUT OF EXPENSES, WHICH DISALLOWANCES MADE BY THE ASSESSING OFFICER ARE ALL CONTRARY TO FACTS BAD IN LAW AND BE DELETED : (I) RS.5,91,685/- OUT OF LABOUR CHARGES. (II) RS.37,641/- OUT OF CONVEYANCE EXPENSES.. (III) RS.1,45,497/- OUT OF OTHER DEDUCTIONS (IV) RS.2,500/- OUT OF DONATION (V) RS.28,989/- OUT OF INSURANCE . (VI) RS.3,01,467/- OUT OF DEPRECIATION. :- 2 -: (VII) RS.40,000/- OUT OF LEGAL EXPENSES. THE ABOVE DISALLOWANCES ARE CONTRARY TO FACTS, BAD IN LAW AND BE DELETED. 2. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE ADDITION OF RS.65,84,047/- OUT OF SUNDRY CREDITORS, WHICH SUNDRY CREDITORS BEING EITHER OLD BALANCES BROUGHT FORWARD FROM THE EARLIER YEARS OR BEING TRADE CREDITORS. THE ADDITION MADE BE DELETED. 3. BECAUSE NO PORTION OF THE AMOUNT OF RS.65,84,047/- BEING LOANS OR CASH CREDITS OR PART OF BORROWED FUNDS (AS WOULD BE CLEAN FROM THE TAR), QUESTION OF MAKING ADDITION ON ACCOUNT OF SUNDRY CREDITORS DOES NOT ARISE. 4. BECAUSE THE CIT(A) AS WELL AS THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT THE ASSESSEE IS A CIVIL CONTRACTOR AND HAS DECLARED A NET INCOME OF RS.8,22,230/- ON TOTAL GROSS RECEIPTS OF RS.1,72,60,587/- GIVING A NET PROFIT RATE OF 5.34%. ACCOUNTS HAVE BEEN DULY AUDITED AND THE TAR HAVING BEEN FURNISHED, QUESTION OF MAKING ADHOC DISALLOWANCES/ESTIMATING THE NET PROFIT DOES NOT ARISE. THE ADDITION MADE BE DELETED. 5. BECAUSE THE CIT(A) AS WELL AS THE ASSESSING OFFICER HAS ERRED ON FACTS AND IN LAW IN ESTIMATING AND ASSESSING THE INCOME OF THE ASSESSEE AT RS.85,54,060/- THEREBY NET PROFIT BEING 49.50% WHICH IS WITHOUT ANY BASIS, TOTALLY UNJUSTIFIABLE NOR POSSIBLE, BAD IN LAW AND BE DELETED. 6. BECAUSE IN ANY CASE AND IN ALL CIRCUMSTANCES OF THE CASE, THE DISALLOWANCES AND ADDITION MADE ARE ALL CONTRARY TO FACTS, BAD IN LAW AND BE DELETED. 2. DURING THE COURSE OF HEARING OF THE APPEAL, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION THAT THE LD. CIT(A) HAS CONFIRMED THE ADDITIONS MADE BY THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACT THAT THE BOOKS OF ACCOUNT WERE LOST AND IN THE ABSENCE OF THE BOOKS OF ACCOUNT, :- 3 -: ADDITION UNDER DIFFERENT HEADS ARE NOT POSSIBLE AND THE ASSESSING OFFICER OUGHT TO HAVE AT THE MOST ESTIMATED THE GROSS PROFIT KEEPING IN VIEW THE PAST HISTORY OF THE ASSESSEE. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE COMPLAINT MADE TO THE POLICE STATION AND THE FIR LODGED CONSEQUENT THERETO. THE PHOTOCOPIES OF THE COMPLAINT AS WELL AS THE FIR ARE ON RECORD AT PAGES 1 TO 6 OF THE COMPILATION OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT IN THE ABSENCE OF THE BOOKS OF ACCOUNT, THE ADDITIONS UNDER DIFFERENT HEADS ON AD-HOC BASIS ARE NOT PERMISSIBLE. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT AND THE ORDER OF THE TRIBUNAL IN THE CASE OF PRAGATI ENGINEERING CORPORATION, RAEBAREILY VS. INCOME TAX OFFICER IN I.T.A. NO. 304/LKW/2011. IN THIS CASE, THE HON'BLE HIGH COURT HAS OBSERVED, WHILE REMANDING THE MATTER TO THE TRIBUNAL, THAT IN THE ABSENCE OF THE BOOKS OF ACCOUNT, THE ASSESSING AUTHORITY COULD HAVE CONSIDERED OTHER DOCUMENTS I.E. AUDITORS REPORT, ETC. AND WHILE ADJUDICATING THE ISSUE, THE TRIBUNAL HAS ESTIMATED THE NET PROFIT RATE. THEREFORE, IN THE INSTANT CASE, INSTEAD OF MAKING DISALLOWANCE UNDER DIFFERENT HEADS ON AD-HOC BASIS, THE ASSESSING OFFICER OUGHT TO HAVE ESTIMATED THE NET PROFIT AFTER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT THE LD. CIT(A), INSTEAD OF ESTIMATING THE NET PROFIT, HAS ALSO CONFIRMED THE DISALLOWANCES MADE BY THE ASSESSING OFFICER. 3. THE LD. D.R., ON THE OTHER HAND, HAS PLACED RELIANCE UPON THE ORDERS OF THE LOWER AUTHORITIES. 4. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT UNDISPUTEDLY THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER DESPITE VARIOUS OPPORTUNITIES AFFORDED TO IT. THEREAFTER THE ASSESSING OFFICER HAS :- 4 -: EXAMINED VARIOUS EXPENSES CLAIMED BY THE ASSESSEE, BUT IN THE ABSENCE OF THE BOOKS OF ACCOUNT, HE DID NOT ACCEPT THE SAME AND MADE AD-HOC ADDITIONS UNDER DIFFERENT HEADS AND ASSESSED THE INCOME OF THE ASSESSEE AT RS.85,54,060/-. THE ADDITIONS MADE ON AD-HOC BASIS WERE ALSO CONFIRMED BY THE LD. CIT(A). WE HAVE BEEN CARRIED THROUGH THE COMPLAINT MADE TO THE POLICE AND THE FIR LODGED WITH THE POLICE STATION, PANKI, KANPUR WITH REGARD TO THE THEFT OF VEHICLE IN WHICH ORIGINAL BOOKS OF ACCOUNT WERE KEPT. THEREFORE, IN THE ABSENCE OF THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER HAS REJECTED THE BOOK RESULTS ON ACCOUNT OF NON-VERIFICATION OF THE CLAIM RAISED BY THE ASSESSEE AND IN THAT SITUATION THE RIGHT COURSE AVAILABLE WITH THE ASSESSING OFFICER IS TO ESTIMATE THE GROSS PROFIT IN THE LIGHT OF THE PAST HISTORY OF THE ASSESSEE. 5. SIMILAR SITUATION HAS ARISEN IN THE CASE OF PRAGATI ENGINEERING CORPORATION, RAEBAREILY VS. INCOME TAX OFFICER (SUPRA), IN WHICH THE BOOKS OF ACCOUNT COULD NOT BE PLACED BEFORE THE ASSESSING OFFICER ON ACCOUNT OF ITS LOSS AND THE ASSESSING OFFICER HAS MADE ADDITION UNDER DIFFERENT HEADS AND WHEN THE MATTER WAS TRAVELLED TO THE HON'BLE HIGH COURT, THE HON'BLE HIGH COURT HAS OBSERVED THAT IN SUCH A SITUATION THE NET PROFIT SHOULD BE ESTIMATED KEEPING IN VIEW THE PAST BOOK RESULTS OF THE ASSESSEE AND THEIR LORDSHIPS ACCORDINGLY RESTORED THE MATTER TO THE TRIBUNAL AND THE TRIBUNAL HAS PASSED A CONSEQUENTIAL ORDER ESTIMATING THE NET PROFIT KEEPING IN VIEW THE PAST BOOK RESULTS OF THE ASSESSEE. IN THE LIGHT OF THIS OBSERVATION OF THE TRIBUNAL AND THE HON'BLE HIGH COURT, WE ARE ALSO OF THE VIEW THAT IN THE INSTANT CASE WHERE THE BOOKS OF ACCOUNT ARE LOST AND COULD NOT BE PRODUCED, ADDITION UNDER DIFFERENT HEADS ON AD-HOC BASIS ARE NOT PROPER. INSTEAD OF MAKING ADDITIONS UNDER DIFFERENT HEADS ON AD-HOC BASIS, THE ASSESSING OFFICER OUGHT TO HAVE REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE NET PROFIT KEEPING IN VIEW THE PAST RECORD OF THE ASSESSEE. :- 5 -: 6. DURING THE COURSE OF HEARING OF THE APPEAL, OUR ATTENTION WAS INVITED THAT DURING THE ASSESSMENT YEAR 2009-10, THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE INCOME OF THE ASSESSEE AT 8% OF THE GROSS RECEIPTS. SIMILARLY, IN ASSESSMENT YEAR 2007-08 THE NET PROFIT WAS ESTIMATED AT 7% OF THE GROSS CONTRACTUAL RECEIPTS. NOTHING HAS BEEN PLACED BEFORE US TO ESTABLISH THAT THESE ORDERS OF THE ASSESSING OFFICER WERE NOT ACCEPTED BY THE ASSESSEE AND NET PROFIT ESTIMATED BY THE ASSESSING OFFICER WAS FURTHER REDUCED BY THE APPELLATE AUTHORITIES. IN THE ABSENCE OF THESE FACTS, WE ARE OF THE VIEW THAT IN THE IMMEDIATELY PRECEDING YEAR, THE NET PROFIT ESTIMATED BY THE ASSESSING OFFICER WAS AT 8% AND IN ASSESSMENT YEAR 2008-09 IT WAS AT 7%. IN EARLIER YEARS ALSO THE BOOKS OF ACCOUNT WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAS ESTIMATED THE NET PROFIT AFTER REJECTING THE BOOKS OF ACCOUNT. SIMILAR EXERCISE COULD HAVE BEEN DONE IN THE IMPUGNED ASSESSMENT YEAR, BUT THE ASSESSING OFFICER, INSTEAD OF ESTIMATING THE NET PROFIT, HAS MADE ADDITION UNDER DIFFERENT HEADS BY MAKING AD-HOC DISALLOWANCE. IN THE LIGHT OF THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT IN THE INSTANT CASE ALSO NET PROFIT SHOULD BE ESTIMATED AT 8% ON THE GROSS RECEIPTS FOLLOWING THE ORDERS OF EARLIER ASSESSMENT YEARS IN THE CASE OF THE ASSESSEE. ACCORDINGLY THE ORDER OF THE LD. CIT(A) IS SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ESTIMATE THE NET PROFIT RATE AT 8% OF THE GROSS RECEIPTS SHOWN BY THE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] :- 6 -: ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12 TH JUNE, 2015 JJ:0505 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR