VISHVA KARMA TUBEWELL CO., BUNDI V. ITO, BUNDI

ITA 402/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5454 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 15-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DR DHK
• Assessee Lawyers: M K JAIN
• Keywords: Depreciation
• Section: 44AD; 144; 2

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 402/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 M/S. VISHVA KARMA TUBEWELL COMPANY CHATURPURA ROAD BUNDI CUKE VS. THE ITO WARD-BUNDI BUNDI LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAAFV 7712 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI M.K. JAIN, ADVOCATE JKTLO DH VKSJ LS@ REVENUE BY :SHRI RAJ MEHRA, JCIT - DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 12/01/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 25 /02/2016 VKNS'K@ ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(A), AJMER DATED 10-01-2013 FOR THE ASSESSMENT YEAR 2008-09 WHEREIN FOLLOWING GROUNDS ARE RAISED. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, EVEN OTHERWISE IF BOOKS OF ACCOUNT ARE REJECTED, IT IMPL IES THAT THE BOOKS RESULTS ARE NOT RELIABLE. THEN THE AO SHALL H AVE TO MAKE ASSESSMENT TO THE BEST OF HIS JUDGMENT IN THE MANNER PROVIDED U/S 144 AS PER SECTION 145(3) OF THE I.T. ACT, 1961 AND ALTHOUGH APPELLANT FIRMS CASE IS NOT COVERED U/ S 44AD OF THE ACT DUE TO HIGHER TURNOVER BUT NET PROFIT RATE PRESCRIBED ITA NO. 402/JP/2013 M/S. VISHVA KARMA TUBEWELL COMPANY VS. ITO ,WARD-BU NDI . 2 U/S 44AD IS ONLY 8% WHEREAS THE APPELLANT FIRM HAS DECLARED 8.38% NET PROFIT EVEN HIGHER TURNOVER WHICH IS REQ UIRED TO ACCEPT BEING MOST REASONABLE. THEREFORE, ADDITION O F RS. 5,09,028/- SUSTAINED BY THE LD. CIT(A), AJMER ARE R EQUIRED TO BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LAW OF THE CASE THE LD. CIT(A) HAS ERRED IN OBSERVING THAT ASS ESSEE IS NOT CARRYING ON THE BUSINESS OF CIVIL CONSTRUCTION, BEING AS PER I.T. ACT CIVIL CONSTRUCTION U/S 44AD INCLUDES:- (A) THE CONSTRUCTION OR REPAIR OF ANY BUILDING, BRI DGE, DAM OR OTHER STRUCTURE OR ANY CANAL OR ROAD. (B) THE EXECUTION OF ANY WORK CONTRACTS THE LD. CIT(A) HAS FURTHER ERRED IN SUSTAINING ADDI TION WHEN HE HAS NOT UPHELD REJECTION OF BOOKS OF ACCOUN T U/S 145(3) OF THE I.T. ACT MADE BY THE AO OBSERVING THA T NEITHER TOTAL RECEIPTS NOR ANY OTHER EXPENSES HAVE BEEN SHO WN TO BE INCORRECT BY THE AO. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN SUSTAINING FOLLOWING DISALL OWANCE MADE BY THE AO (I) IN DISALLOWING OUT OF DIESEL FOR MACHINERY EXPE NSES TO RS. 2,91,415/- (II) DISALLOWANCE OUT OF LABOUR, METADOOR & TRACTOR HIRE CHARGES RS. 61,735/- (III) DISALLOWANCE OUT OF MATERIAL EXPENSES RS. 48,520/- (IV) DISALLOWED OUT OF REPAIR AND MAINTENANCE FOR MACHINERY EXPENSES RS. L,07,358/- ITA NO. 402/JP/2013 M/S. VISHVA KARMA TUBEWELL COMPANY VS. ITO ,WARD-BU NDI . 3 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF RIGGING BORE WELLS FOR G OVT. AGENCIES AND PRIVATE PARTIES. THE ASSESSEE FILED RETURN OF INCOM E ON 30-09-2008 ON THE BASIS OF AUDITED BOOKS OF ACCOUNTS, DECLARING TOTAL INCOME AT NIL WHICH WAS PROCESSED U/S 143(1) OF THE I.T. ACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY THROUGH CASS. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS DECLARED TOTAL RECEIPTS FROM GOVT. AND PRIVATE WORK OF DIGGING OF TUBE WELL AND BORING AT RS. 56,13,382/-, AGAINST THESE RECEIPTS IT HAS CLAIMED TOTAL EXPENSES AGGREGATING TO RS. 51,57,582/-. THE AO REQUIRED THE ASSESSEE FIRM TO PRODUCE ITS BOOKS OF ACCOUNT WITH RELEVANT VOUCHERS IN ORDER TO VERIFY THE GENUINENESS OF THE EXPENSES DEBITED IN THE INCOME & EXPENDITURE ACCOUNT, ASSESSEE FIRM NEITHER SUBMITTED THE DESIRE D DETAILS ALONG WITH SUPPORTING VOUCHERS OF THE EXPENSES NOR GAVE SATISF ACTORY EXPLANATION BEFORE THE AO. THE AO FOR WANT OF NECESSARY DETAILS ABOUT EXPENDITURE REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE FIRM AND MADE A DISALLOWANCE OF RS. 10,91,860/-. 2.2 AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL BEFORE THE LD. CIT(A) WHEREIN IT WAS CONTENDED THAT WHEN THE BOOKS OF ACC OUNTS ARE REJECTED THEN ONLY GROSS PROFIT SHOULD HAVE BEEN ESTIMATED A ND DISALLOWANCE OF ITA NO. 402/JP/2013 M/S. VISHVA KARMA TUBEWELL COMPANY VS. ITO ,WARD-BU NDI . 4 EXPENDITURE WAS UNJUSTIFIED BESIDES MERITS OF THE D ISALLOWANCE WAS CHALLENGED. THE LD. CIT (A) AFTER CONSIDERING THE R EPLY AND MATERIAL AVAILABLE ON RECORD UPHELD THE REJECTION OF BOOKS O F ACCOUNTS. THE ASSESSEE'S PLEA THAT IN CASE OF REJECTION OF BOOKS OF ACCOUNT ONLY GROSS PROFIT SHOULD BE ESTIMATED AND BEING A CIVIL CONTRA CTOR, PROVISIONS OF SECTION 44AD SHOULD BE APPLIED. THE LD. CIT(A) REJE CTED THE ASSESSEE'S BOTH PLEAS HOLDING THAT ON REJECTION OF BOOKS AO HA S POWER TO DISALLOW EXPENSES AND ASSESSEE'S RECEIPTS BEING MORE THAN RS . 40 LACS IT WAS NOT IN THE BUSINESS OF CIVIL CONSTRUCTION AS PROVIDED U/S 44AD OF THE ACT. THE LD. CIT(A) HOWEVER GAVE SUBSTANTIAL PART RELIEF IN RESPECT OF DIESEL MACHINERY EXPENSES BY REDUCING IT FROM RS. 8,74,246 /- TO RS. 2,91,415/-. OTHER DISALLOWANCES WERE UPHELD BY THE LD. CIT(A). 2.3 AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL WHE REIN THE LD. AR OF THE ASSESSEE REITERATED THE FACTS AND CONTENTIONS A S RAISED BEFORE THE LOWER AUTHORITIES AND FURTHER CONTENDS THAT :- (I) THE REJECTION OF BOOKS OF ACCOUNT IS UNJUSTIFIE D. ONCE THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE REJECTED T HEN THE AO IS SUPPOSED TO MAKE A FAIR ESTIMATION OF GROSS PROF IT I.E. 8% AS PRESCRIBED IN SECTION 44AD OF THE ACT AND THE NE T PROFIT RATE AT 8.12% DECLARED BY THE ASSESSEE IS REASONABL E ITA NO. 402/JP/2013 M/S. VISHVA KARMA TUBEWELL COMPANY VS. ITO ,WARD-BU NDI . 5 (II) THE BUSINESS OF THE BORE WELL AMOUNTS TO CIVIL CONSTRUCTION AS PER SECTION 44AD I.E. EXECUTION O F ANY WORK CONTRACT. (III) THE RETURN OF THE ASSESSEE DECLARES NIL INCOM E AND BECAUSE OF CLAIM OF DEPRECIATION AT RS. 4,66,073/- AND PARTNERS INTEREST AT RS. 4,66,378/-, THE DISALLOWA NCE SHOULD BE DELETED BEING THE REASONABLE CLAIM. THE LD. AR RELIED ON THE FOLLOWING CASE LAWS. (I)N. RAMCHANDRA REDDY (ITA NO. 1372 OF 2007 HYD BENCH (II) SUBODH GUPTA ITA NO. 80/2014 DT. 9-12-2014 DEL . H.C. (III)MAHESH CHAND CONTRACTOR ITA NO. 138/AGRA/2012 AGRA (IV) CHOUDHARY & BROTHER 135 TTJ (JP) (UO) 55 (V) ASHOK JAIN KOTA VS. DIT (DECIDED ON 13-02-15) (VI) M/S. VED PRAKASH PAREEKK VS. ITO (TW VOL. 39 PAGER 176 (VII) M/S. VIJAY BUILDERS JAIPUR (TW VOL.III PART 3 PAGE 93) (VIII) JASWANT SINGH CONTRACTOR VS. ITO (ITA NO. 11 09/CHD/2011 ITAT CHANDIGARH) (IX) RELIANCE SURFACE COATINGS 7 ITR (TRIB.) 183 (A HD.) (X) CIT VS. GOTAN LIME KHANIJ UDYOG 256 ITR 243 (R AJ.) ITA NO. 402/JP/2013 M/S. VISHVA KARMA TUBEWELL COMPANY VS. ITO ,WARD-BU NDI . 6 2.4 THE LD. DR ON THE OTHER HAND VEHEMENTLY CONTEND S THAT NONE OF THE ASSESSEE'S PLEA DESERVES ANY CREDITABILITY INASMUCH AS :- (I) THE ASSESSEE ON ONE HAND CLAIMS TO BE MAINTAINI NG DETAILED BOOKS OF ACCOUNT AND SUPPORTING VOUCHERS O F EXPENDITURE AND WHEN CALLED ON IT DID NOT PRODUCE EXPENDITURE VOUCHERS. THERE IS NO QUALIFICATION BY AUDITORS THAT VOUCHERS ARE NOT MAINTAINED BY IT, BESIDES ASS ESSEE HAS NOT GIVEN ANY REASON AS TO WHY THE EXPENDITURE VOUC HERS ONLY COULD NOT BE PRODUCED. THUS THERE IS A MYSTERI OUS ADVANTAGE TO ASSESSEE IN NOT PRODUCING THE EXPENDIT URE VOUCHERS IN QUESTION, FOR WHICH ASSESSEE CANNOT DER IVE ADVANTAGE OUT OF SUCH INFIRMITY. (II) IN THE ABSENCE OF VOUCHERS, THE AO WAS LEFT WI TH NO CHOICE EXCEPT TO REJECT THE BOOKS OF ACCOUNT TO DET ERMINE PROPER TAXABLE INCOME OF THE ASSESSEE. THEREFORE, R EJECTION OF BOOKS OF ACCOUNT BEING ONLY CHOICE WHICH HAS BEE N RIGHTLY EXERCISED BY AO AND JUSTIFIABLY UPHELD BY T HE LD. CIT(A). (III) THE ASSESSEE CANNOT PRECIPITATE THE ACTION OF REJECTION OF BOOKS OF ACCOUNT AND THEREAFTER DICTATE HOW BEST JUDGMENT ASSESSMENT SHOULD BE COMPLETED BY AO. SECTION 144 C ONFERS UNFETTERED POWERS ON AO TO FRAME REASONABLE ASSESS MENT TO BEST OF HIS JUDGMENT. THEREFORE, THE ASSESSEE CANNO T DICTATE THAT AFTER REJECTION OF BOOKS OF ACCOUNT ONLY GROSS PROFIT METHOD SHOULD BE ADOPTED. THE MAJOR INFIRMITY AND P ROBLEM IN THE ACCOUNTS AND COMPUTATION OF PROPER INCOME WA S NON- ITA NO. 402/JP/2013 M/S. VISHVA KARMA TUBEWELL COMPANY VS. ITO ,WARD-BU NDI . 7 FURNISHING THE EXPENDITURE VOUCHERS CONSEQUENTLY LD . AO DISALLOWED REASONABLE PART OF EXPENSES TO ASSESS PR OPER INCOME ON HIS BEST JUDGMENT. THEREFORE, THE AO WAS WITHIN HIS LEGAL RIGHTS TO RECOURSE THE DISALLOW EXPENDITU RE. THE LD. CIT(A) HAS UPHELD THE LINE OF ACTION OF THE AO HOWE VER HE HAS BEEN GENEROUS IN AWARDING SUBSTANTIAL RELIEF IN MACHINERY AND DIESEL HEAD. (IV) THE ASSESSEE'S PLEA THAT SECTION 44AD SHOULD B E TAKEN AS ANALOGY TO THIS CASE. THE SAME IS APPLICABLE TO CONTRACTOR HAVING RECEIPTS BELOW RS. 40 LACS. SINCE THE ASSESS EE BY STATUTORY PROVISION IS BARED FROM THE APPLICABILITY OF SECTION 44AD, THERE IS NO JUSTIFICATION ON THE PART OF THE ASSESSEE THAT HE SHOULD BE ASSESSED U/S 44AD BY OPERATION OF LAW WHICH IS NOT APPLICABLE ON HIM. (V) THE LD. CIT(A) HAS ACCORDED SUBSTANTIAL RELIEF BY REDUCING THE DISALLOWANCE AND CONTRACT EXPENSES TO THE EXTENT OF 1/3 RD OF THE EXPENSES. THUS THE ORDER OF THE LD. CIT(A) IS VERY REASONABLE BASED ON MATERIAL FACTS A VAILABLE ON RECORD. 2.5 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. I FIND MERIT IN THE CONTENTION S OF THE LD. DR. THE ASSESSEE'S PLEA THAT BOOKS OF ACCOUNT SHOULD NOT HA VE BEEN REJECTED U/S 145(3) WHICH IS DEVOID OF ANY MERIT AS NOWHERE IT H AS BEEN CLAIMED THAT EXPENSES VOUCHERS WERE PRODUCED BY THE ASSESSEE BEF ORE ANY FORUM. THUS ITA NO. 402/JP/2013 M/S. VISHVA KARMA TUBEWELL COMPANY VS. ITO ,WARD-BU NDI . 8 THE DEFICIENCY REMAINS UN-CONTROVERED BY THE ASSESS EE, CONSEQUENTLY THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE RIGHTLY REJECT ED. 2.6 APROPOS ASSESSEE'S PLEA THAT HAVING REJECTED TH E BOOKS OF ACCOUNT THE AO CAN ONLY ESTIMATE THE GROSS PROFIT IS ALSO D EVOID OF ANY MERIT. AFTER REJECTION OF BOOKS OF ACCOUNT THE LAW PROVIDE S FOR BEST JUDGMENT ASSESSMENT BY THE AO. THEREFORE, THE ASSESSEE CANN OT DICTATE THE METHOD OR WAY CLAIMING BEST JUDGMENT ASSESSMENT. THE ASSES SEE'S PLEA THAT HE BEING IN THE BUSINESS OF CIVIL CONSTRUCTION, SECTIO N 44AD SHOULD BE APPLIED TO HIM IS BASELESS INASMUCH AS THE LAW ITSE LF PROVIDES THAT PROVISION WILL NOT BE APPLICABLE TO ASSESSEE HAVING RECEIPT ABOVE RS. 40 LACS. THE ASSESSEE'S CASE IS WITHIN THE PURVIEW OF SECTION 44AD OF THE ACT BY OPERATION OF LAW ITSELF. THE ASSESSEE'S DELI BERATE ACT OF MAINTAINING AUDITED BOOKS OF ACCOUNT AND DELIBERATELY NOT PRODU CING EXPENDITURE VOUCHERS CANNOT BE TAKEN LIGHTLY. NO EXPLANATION HA S BEEN OFFERED BY THE ASSESSEE AS TO WHY EXPENDITURE VOUCHERS COULD NOT B E PRODUCED BY HIM. THUS THE ACT OF DEFIANCE DEMONSTRATE RECKLESS ATTIT UDE OF THE ASSESSEE WHICH CANNOT BE ACCEPTED. THE CASE LAWS CITED BY TH E ASSESSEE ARE ALTOGETHER ON DIFFERENT FACTS AS NONE OF THEM INVOL VES DELIBERATE NON FURNISHING OF EXPENDITURE VOUCHERS. THE ASSESSEE'S FACTS BEING DELIBERATELY NON-PRODUCTION OF EXPENDITURE VOUCHERS DOES NOT FIT IN THE ITA NO. 402/JP/2013 M/S. VISHVA KARMA TUBEWELL COMPANY VS. ITO ,WARD-BU NDI . 9 FOUR CORNERS OF THE CASE LAWS CITED BY THE ASSESSEE . THUS IN VIEW OF THE ABOVE DELIBERATIONS, THERE IS NO MERIT IN THE GROUN DS OF APPEAL RAISED BY THE ASSESSEE WHICH IS DISMISSED AND THE ORDER OF TH E LD. CIT(A) IS UPHELD. 3.0 IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. . ORDER PRONOUNCED IN THE OPEN COURT ON 25/ 02/20 16 SD/- VKJ-IH-RKSYKUH (R.P.TOLANI) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 25 /02/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. VISHVA KARMA TUBEWELL COMPANY, BUNDI 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD-BUNDI, 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. 402/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR