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

ITA 403/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5431 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 15-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK
• Assessee Lawyers: M K JAIN
• Keywords: Rejection of books of accounts
• Section: 44AD; 143(3); 144

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO.403/JP/13 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 M/S VISHVA KARMA BORING CO. POLICE LINE ROAD, BUNDI CUKE VS. THE INCOME TAX OFFICER, BUNDI LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.AAFFV 1075 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO.369/JP/13 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 THE INCOME TAX OFFICER, BUNDI CUKE VS. M/S VISHVA KARMA BORING CO. POLICE LINE ROAD, BUNDI LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.AAFFV 1075 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI M.K. JAIN, ADVOCATE JKTLO DH VKSJ LS@ REVENUE BY :S HRI RAJ MEHRA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 02 .01.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 26 /02/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. ITA NO. 403/JP/13 & ITA NO/ 369/JP/13 M/S VISHVA KARMA BORING COMPANY, BUNDI VS. ITO, BUND I 2 THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AS WE LL AS BY DEPARTMENT AGAINST THE ORDER OF CIT(A), AJMER DATED 10.01.2013 WHEREIN THE ASSESSEE AND THE DEPARTMENT HAVE TAKEN THE FOLLOWING RESPECTIVE GROUNDS OF APPEAL: ITA NO. 403/JP/13 (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, EVEN OTHERWISE IF BOOKS OF ACCOUNTS ARE REJECTED, IT IMPLIES THAT THE BOOKS RE SULTS ARE NOT RELIABLE. THEN THE AO SHALL HAVE TO MAKE ASSESSMENT TO THE BEST OF HIS JUDGEMENT IN THE MANNER PROVIDED U/S 144 AS PER SECTION 145(3 ) OF THE IT ACT, 1961 AND ALTHOUGH APPELLANT FIRMS CASE IS NOT COVERED U/S 44 AD OF ACT DUE TO HIGHER TURNOVER, BUT NET PROFIT RATE PRESCRIBED U/S 44AD IS ONLY 8%. WHEREAS THE APPELLANT FIRM HAS DECLARED 8.38% NET PROFIT EVEN H IGHER TURNOVER WHICH IS REQUIRED TO ACCEPTED BEING MOST REASONABLE. THEREF ORE ADDITION OF RS. 6,02,239/- SUSTAINED BY THE LD. CIT(A), AJMER AS AG AINST RS.16,22,420/- MADE BY LD. AO REQUITED 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 ASSESSEE IS NOT CARRYIN G ON THE BUSINESS OF CIVIL CONSTRUCTION. THE LD CIT(A) HAS FURTHER ERRED IN SU STAINING ADDITION WHEN HE HAS NOT UPHELD REJECTION OF THE BOOKS OF ACCOUNTS U /S 145(3) OF THE ACT. (3) ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LAW OF THE CASE, THE LD. CIT(A) HAS ERRED IN SUSTAINING FOLLOWING DISALLOWANCE MA DE BY THE LD. AO: (I) DISALLOWANCE OUT OF DIESEL FOR MACHINERY EXPENSES T O RS.358120/- (II) DISALLOWANCE OUT OF LABOUR CHARGES RS. 59513/- (III) DISALLOWANCE OUT OF MATADOR HIRE CHARGES RS. 45213/ - (IV) DISALLOWANCE OUT OF GITTI PURCHASES EXPENSES RS. 11 6322/- (V) DISALLOWANCE OUT OF TRANSPORTATION EXPENSES OF RS. 23071/- ITA NO. 369/JP/13 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A), KOTA HAS ERRED IN: (I) RESTRICTING THE DISALLOWANCE TO RS. 3,58,120/- AS A GAINST RS. 10,74,362/- OUT OF DIESEL EXPENSES FOR MACHINERY (II) DELETING THE ADDITION OF RS. 3,03,866/- ON ACCOUNT OF SALARY ITA NO. 403/JP/13 & ITA NO/ 369/JP/13 M/S VISHVA KARMA BORING COMPANY, BUNDI VS. ITO, BUND I 3 (III) DELETING THE ADDITION OF RS. 4,32,000/- ON A/C OF UNEXPLAINED SALE PROCEEDS OF TOYOTA QUALIS. 2. BRIEF FACTS OF THE CASE: THE APPELLANT IS A PART NERSHIP FIRM, WHICH DERIVES INCOME FROM DIGGING OF TUBE WELLS AND BORING ON CON TRACT BASIS FROM GOVERNMENT AND PRIVATE CONTRACTS. DURING THE YEAR UNDER CONSID ERATION, APPELLANT FIRM HAS DECLARED TOTAL RECEIPT OF RS. 99,73,276/- AND NET P ROFIT OF RS. 8,35,359/- SHOWING NET PROFIT RATE OF 8.38%. THE CASE WAS SELECTED F OR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S 143(3) AND AO MADE ADDITION OF RS.16, 22,420/- AFTER REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) ON ACCOUNT OF VARIOUS DISALLOWANCES. BESIDES, AN ADDITION OF RS. 4,32,000/- ON ACCOUNT OF UNEXPLAINE D SALE PROCEEDS OF TOYOTA QUALIS WAS ALSO MADE TO THE INCOME OF THE APPELLANT . BEING AGGRIEVED, THE APPELLANT WENT IN APPEAL BEFOR E THE CIT(A). THE CIT(A) DID NOT UPHELD THE REJECTION OF BOOKS OF ACCOUNT BY AO BY OBSERVING THAT THE LD. AO HAS INVOKED THE PROVISIONS OF SECTION 145(3) MERELY ON THE BASIS OF NON VERIFICATION OF SOME EXPENSES. HOWEVER, HE CONFIRM ED THE DISALLOWANCES OF SALARY, LABOUR, MATADOR HIRE CHARGES, CEMENT AND GI TTI PURCHASES/EXPENSES AND TRANSPORTATION EXPENSES IN FULL AND RESTRICTED THE DISALLOWANCE ON ACCOUNT OF DIESEL FOR MACHINERY TO RS. 3,58,120/- AS AGAINST R S. 10,74,362/- MADE BY THE AO DURING ASSESSMENT PROCEEDINGS. THE ADDITION OF RS. 4,32,000/- ON ACCOUNT OF UNEXPLAINED SALE PROCEEDS OF TOYATA QUALIS WAS DELE TED BY THE LD. CIT(A). 3. THE LD AR SUBMITTED THAT AT THE OUTSET, IT IS HU MBLY SUBMITTED THAT THE APPELLANT FIRM IS ENGAGED IN WORKS CONTRACT OF DIGG ING OF TUBE WELLS AND BORING PROCURED FROM GOVERNMENT AS WELL AS FROM PRIVATE CO NCERNS. IN APPELLANTS CASE THE LD. AO REJECTED THE ENTIRE BOOKS OF ACCOUNT U/S 145(3) MERELY ON THE BASIS OF SOME EXPENSES FOUND TO BE UNVOUCHED. BUT THE GROSS RECEIPTS DECLARED BY THE ITA NO. 403/JP/13 & ITA NO/ 369/JP/13 M/S VISHVA KARMA BORING COMPANY, BUNDI VS. ITO, BUND I 4 APPELLANT WERE NOT DISTURBED AT ALL. WHEN THE BO OKS WERE NOT RELIABLE IN THE OPINION OF THE AO, HE HAS TO MAKE A BEST JUDGEMENT ASSESSMENT AND SUCH CIRCUMSTANCES APPROPRIATE NET PROFIT RATE IS TO BE APPLIED BUT INSTEAD OF APPLYING NET PROFIT RATE AFTER REJECTION OF BOOKS OF ACCOUNT , SUBSTANTIAL DISALLOWANCE WERE MADE RESULTING IN AN ABNORMAL , INFLATED AND UNACCE PTABLE NET PROFIT RATE. IF THE VERSION OF THE AO IS ACCEPTED, IT WILL RESULT IN EX ORBITANT NET PROFIT RATE OF 20.59% ON GROSS RECEIPTS OF RS. 99,73,276/- AS AGAINST 8.3 8% DECLARED BY THE APPELLANT FIRM WHICH IS MORE THAN TWICE THE RATE DECLARED BY THE APPELLANT AND NOT ACCEPTABLE AT ALL CONSIDERING THE NATURE OF BUSINES S THE APPELLANT IS ENGAGED IN. FURTHER, OUT OF TOTAL GROSS RECEIPTS OF RS. 99,73,2 76/- SHOWN BY THE APPELLANT THE RECEIPTS FROM GOVERNMENT WORK ALONE W ERE RS 63,73,310/- AND FROM GRAM PANCHAYAT WORK WERE RS. 6,87,203/- THUS CONSTI TUTING 70.80% OF TOTAL CONTRACT RECEIPTS WHICH IS INDICATIVE OF THE FACT T HAT THE APPELLANT FIRM WERE MOSTLY DOING THE GOVERNMENT AND GRAM PANCHAYAT WOR K WHERE PROFIT MARGIN IS VERY LOW HENCE FROM THIS POINT OF VIEW ALSO THE EXO RBITANT ADDITIONS MADE BY THE LD. AO AND CONFIRMED BY THE CIT(A) SUFFER FROM VICE OF PERVERSITY. IT IS FURTHER SUBMITTED THAT UNDER THE FACTS & CIRC UMSTANCES OF THE CASE, EVEN THE BEST JUDGEMENT ASSESSMENT SHOULD BE BASED ON PRAGMATIC AND REASONABLE CONSIDERATIONS. THE AO SHOULD NOT ACT V INDICTIVELY AND CAPRICIOUSLY. IT WOULD HAVE BEEN MORE APPROPRIATE TO APPLY A REASONA BLE NET PROFIT RATE SUBJECT TO INTEREST AND REMUNERATION TO PARTNERS INSTEAD OF DISALLOWING VARIOUS EXPENSES. REGARDING VARIOUS SPECIFIC DISALLOWANCES MADE BY TH E AO, THE LD AR FURTHER SUBMITTED AS UNDER: ITA NO. 403/JP/13 & ITA NO/ 369/JP/13 M/S VISHVA KARMA BORING COMPANY, BUNDI VS. ITO, BUND I 5 (I) REGARDING DISALLOWANCE OUT OF DIESEL FOR MACHIN ERY EXPENSES: - OUT OF TOTAL EXPENDITURE OF RS.43,06,220/- ON ACCOUNT OF DIESEL FOR MACHINERY, RS. 10,74,362/- WAS MADE IN CASH THEREFORE BILLS WERE NOT AVAILABLE BUT SELF MADE VOUCHERS WERE SUBMITTED. THEREFORE THE LD. ITO HAS DISALLOWED TH E SAME AND ADDED BACK RS. 10,74,362/- TO THE INCOME OF APPELLANT FIRM. IN THIS REGARD IT IS VERY HUMBLY SUBMITTED THAT DUR ING THE YEAR UNDER CONSIDERATION, EXPENSES OF DIESEL FOR MACHINERY WER E RS.43,06,220/- AGAINST TOTAL RECEIPTS OF RS. 99,73,276/- BEING 43.17% OF TOTAL R ECEIPTS, AND ALSO IN IMMEDIATELY PRECEDING YEAR IT WAS AT RS. 40,46,927/- AGAINST TO TAL RECEIPT OF RS.93,57,057/- BEING 43.25% OF TOTAL RECEIPTS. THEREFORE EXPENDIT URE SHOWN DURING THIS YEAR IS NOT HIGHER IN COMPARISON TO IMMEDIATELY PRECEDING Y EAR DESPITE INCREASE IN TOTAL RECEIPTS, THEREFORE FULLY ALLOWABLE. IT IS ALSO SUBMITTED THAT AS MENTIONED BY THE LD. A O IN HIS ORDER THAT FROM THE COPY OF LEDGER ACCOUNT OF SAID EXPENSES IT WAS NOTE D THAT FICTITIOUS BILL NOS. FOUND TO BE MENTIONED ON VARIOUS DATES IN RESPECT OF DIES EL EXPENSES AGGREGATING TO RS. 10,74,362/- IS NOT CORRECT, BECAUSE WHENEVER DIESEL WAS PURCHASED BILL NO. HAS BEEN MENTIONED. BUT VOUCHER NO. PRINTED IN THIS AC COUNT WERE GENERATED BY COMPUTER AUTOMATICALLY. BOTH BILL NO WHEREVER AVAI LABLE AND VOUCHERS NOS. AUTOMATICALLY GENERATED BY COMPUTER ARE MENTIONED I N LEDGER ACCOUNT IN RESPECT OF THIS EXPENSES AND OTHER EXPENSES ALSO. THEREFORE CONTENTION OF THE LD. AO IN THIS REGARD IS NOT CORRECT. THE LD. AO HAS MENTIONED THAT THE ASSESSEE HAS FAIL ED TO PRODUCE BILLS OF DIESEL EXPENSE CLAIMED BY HIM IS NOT JUSTIFIED. HE HAS ADD ED RS. 10,74,362/- ALLEGING BILLS WERE NOT PRODUCED. IN TUBE WELL BORING WORK, DIESE L FOR MACHINERY IS REQUIRED ITA NO. 403/JP/13 & ITA NO/ 369/JP/13 M/S VISHVA KARMA BORING COMPANY, BUNDI VS. ITO, BUND I 6 UPTO THIS EXTENT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS SUBMITTED TO THE AO THAT COMPARED TO PREVIOUS YEAR WHERE THE TOTAL CONTRACT RECEIPTS FOR DIGGING WORK WERE RS. 82,91,757/- ONLY AND DIESEL E XPENSES FOR MACHINERY WERE ONLY RS. 38,87,803/- WHEREAS IN CURRENT YEAR CONTRA CT RECEIPTS FROM DIGGING WORK WAS FOR RS. 99,73,276/- THEREFORE EXPENSES FOR DIES EL AND OIL FOR MACHINERY INCREASED PROPORTIONALLY. A COMPARATIVE CHART WITH IMMEDIATELY PRECEDING YEAR IS GIVEN BELOW IN RESPECT OF DIESEL EXPENSES FOR BORIN G MACHINERY. A.Y. TOTAL RECEIPTS AMOUNT OF EXPENDITURE CLAIMED INCREASE IN TOTAL RECEIPTS INCREASE IN EXPENDITURE CLAIMED 2007 - 08 82,91,757/ - 38,87,803/ -- -- 2008 - 09 99,73,276/ - 43,06,220/ - 16,81,519/ - 4,18,417/ - THUS IT CAN BE SEEN FROM ABOVE COMPARATIVE CHART TH AT WHILE THE TOTAL RECEIPTS INCREASED BY RS. 16,81,519/-, THE TOTAL EXPENDITURE ON DIESEL FOR MACHINERY INCREASED ONLY BY RS. 4,18,417/- AND THE GROSS RECE IPTS HAVE NOT BEEN DISTURBED AT ALL. THUS THE EXPENDITURE CLAIMED BY THE APPELL ANT IS MOST REASONABLE AND ACCEPTABLE HAVING REGARD TO GROWTH IN BUSINESS. BOT H THE AUTHORITIES BELOW HAVE NOT APPLIED THEIR MIND WHILE MAKING ADDITION. (II) DISALLOWANCE OUT OF LABOUR PAYMENT: IT IS FURTHER SUBMITTED THAT RS. 59,513/- OUT OF TOTAL LABOUR PAYMENT OF RS. 1,7 8,540/- HAS BEEN DISALLOWED BY THE LD. ITO ON THE ALLEGATION THAT NEITHER THESE EX PENSES FOUND TO BE VOUCHED NOR COPY OF LEDGER ACCOUNT INDICATE THE PERSON TO WHOM LABOUR PAYMENT WERE MADE ALSO APPELLANT FIRM DID NOT FURNISH THE SUPPORTING REGISTER/EVIDENCES. ITA NO. 403/JP/13 & ITA NO/ 369/JP/13 M/S VISHVA KARMA BORING COMPANY, BUNDI VS. ITO, BUND I 7 IN THIS REGARD IT IS VERY KINDLY SUBMITTED THAT IN IMMEDIATELY PRECEDING YEAR WHEN TOTAL RECEIPTS WERE RS. 82,91,757/-, THIS EXPENDITU RE WAS RS.3,70,168/- AS AGAINST RECEIPT OF CURRENT YEAR OF RS. 99 73,276/- AND EXPE NSES OF THIS YEAR WERE ONLY RS. 1,78,540/-. THUS THERE WAS A DECREASE OF RS.1,91,6 28/- IN LABOUR CHARGES DESPITE THERE BEING INCREASE IN LABOUR RATES. THEREFORE TH E EXPENDITURE SHOWN BY THE APPELLANT THIS YEAR IS NOT EXCESSIVE AND REASONABLE . MOREOVER DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE APPELLANT SUBMITTED BEFORE THE AO THAT SALARY EXPENSES HAVE INCREASED D UE TO SEVEN PERSONS OUT OF DAILY LABOUR WERE EMPLOYED BY THE FIRM AND SOME OF THE EMPLOYEES OF THE FIRM WERE DEPLOYED ON MATADOR AND TRACTOR. AS A RESULT WHILE SALARY EXPENSES INCREASED, LABOUR EXPENSES AND MATADOR HIRE CHARGES DECREASED SIGNIFICANTLY. THE CIT(A) HAS ALSO DISCUSSED THESE FACTS IN HIS APPELL ATE ORDER AT PARA 11 OF HIS ORDER. DESPITE THIS, THE LD. AO HAS GROSSLY ERRED IN DISAL LOWING 1/3 OF LABOUR EXPENSES MERELY ON THE PRETEXT THAT SUPPORTING VOUCHERS WERE NOT AVAILABLE. IN THIS REGARD, THE ORDER OF CIT(A) ALSO SUFFERS FR OM PERVERSITY IN AS MUCH AS ON THE ONE HAND ADDITION MADE ON ACCOUNT OF SALARY WAS DEL ETED CITING THESE REASONS, ON THE OTHER HAND ADDITION MADE ON ACCOUNT OF LABOUR CHARGES WERE CONFIRMED IN TOTO, DESPITE THE FACT THAT APPELLANTS SUBMISSION IN THIS REGARD WAS ON RECORD BOTH DURING ASSESSMENT AND APPELLATE PROCEEDINGS. THE LD. CIT(A) HIMSELF HAS DISCUSSED THESE ASPECTS THAT LABOUR CHARGES DECREAS ED AND SALARY EXPENSES INCREASED SINCE SEVEN PERSONS OUT OF DAILY LABOUR WERE EMPLOYED AND SOME OF THE EMPLOYEES WERE DEPLOYED ON MATADOR AND TRACTOR. THE LD. CIT(A) HAS ALSO REMARKED THAT LABOUR PAYMENT DECREASED IN THE YEAR UNDER CONSIDERATION INSPITE ITA NO. 403/JP/13 & ITA NO/ 369/JP/13 M/S VISHVA KARMA BORING COMPANY, BUNDI VS. ITO, BUND I 8 OF INCREASE IN LABOUR RATES. THEREFORE IN THESE CI RCUMSTANCES THE CONFIRMATION OF ADDITION BY THE CIT(A) IS ERRONEOUS AND PERVERSE. (III) DISALLOWANCE OUT OF MATADOR HIRE CHARGES: IN THIS REGARD, IT IS HUMBLY SUBMITTED THAT RS. 45,213/- OUT OF TOTAL MATADOR HI RE CHARGES OF RS. 1,35,640/- HAS BEEN DISALLOWED BY THE LD. AO ON THE ALLEGATION THAT NEITHER THESE EXPENSES FOUND TO BE VOUCHED NOR COPY OF LEDGER ACCOUNT INDI CATE THE PERSON TO WHOM LABOUR PAYMENT WERE MADE ALSO APPELLANT FIRM DID NO T FURNISH THE SUPPORTING REGISTER/EVIDENCES. IN THIS REGARD IT IS VERY KINDLY SUBMITTED THAT IN IMMEDIATELY PRECEDING YEAR WHEN TOTAL RECEIPTS WERE RS. 8,91,757/- THIS EXPENDITURE WAS RS. 4,16,538/- WHEREAS AGAINST RECEIPT OF THIS YEAR RS. 99,73,276/- EXPENS ES OF THIS YEAR WERE ONLY RS. 1,35,640/-. THEREFORE DESPITE INCREASE IN GROSS REC EIPTS THIS YEAR, THE EXPENDITURE SHOWN BY THE APPELLANT HAS DECLINED CONSIDERABLY. THEREFORE THE EXPENSES OF RS. 1,35,640/- ARE MOST REASONABLE AND JUSTIFIED AND AN Y ADHOC DISALLOWANCE OUT OF THESE EXPENSE IS UNWARRANTED. MOREOVER DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE APPELLANT SUBMITTED BEFORE THE AO THAT SALARY EXPENSES HAVE INCREASE DU E TO SEVEN PERSONS OUT OF DAILY LABOUR WERE EMPLOYED BY THE FIRM AND SOME OF THE EMPLOYEES OF THE FIRM WERE DEPLOYED ON MATADOR AND TRACTOR. AS A RESULT WHILE SALARY EXPENSES INCREASED, LABOUR EXPENSES AND MATADOR HIRE CHARGER S DECREASED SIGNIFICANTLY. THE CIT(A) HAS ALSO DISCUSSED THESE FACTS IN HIS AP PELLATE ORDER AT POINT NO. (III) PAGE 1 OF HIS ORDER. DESPITE THIS, THE LD. AO HAS GROSSLY ERRED IN DISALLOWING 1/3 OF MATADOR HIRE CHARGES MERELY ON THE PRETEXT THAT SUP PORTING VOUCHERS WERE NOT AVAILABLE. ITA NO. 403/JP/13 & ITA NO/ 369/JP/13 M/S VISHVA KARMA BORING COMPANY, BUNDI VS. ITO, BUND I 9 (IV) DISALLOWANCE OUT OF CEMENT AND GITTI PURCHASE S/EXPENSES : IT IS VERY HUMBLY SUBMITTED THAT RS. 1,16,322/- OUT OF TOTAL PURCHAS ES/EXPENSES OF CEMENT & GITTI FOR RS. 1,75,436/- HAS BEEN DISALLOWED BY THE LD. ITO ON THE ALLEGATION THAT NEITHER THESE EXPENSES FOUND TO BE VOUCHED NOR ANY JUSTIFICATION WAS GIVEN FOR IT. IN THIS REGARD IT IS VERY KINDLY SUBMITTED THAT ON RECEIPTS OF RS. 99,73,276/- EXPENDITURE/PURCHASE OF CEMENT & GITTI OF RS. 1,75, 436/- JUSTIFIED REASONABLE AND ACCEPTABLE. MOREOVER DURING THE COURSE OF ASSESSMEN T PROCEEDINGS IT WAS SUBMITTED TO THE AO THAT THE APPELLANT FIRM DONE PR IVATE WORK FOR RS. 9,12,477/- AS COMPARED TO RS. 3,10,541/- DURING IMMEDIATELY PR ECEDING YEAR FOR WHICH MORE QUANTITIES CEMENT, GITTI AND OTHER MATERIALS WERE R EQUIRED. THEREFORE THE ADDITION MADE BY THE AO IS NOT JUSTIFIED AND DESERVED TO BE DELETED. (V) DISALLOWANCE OUT OF TRANSPORTATION EXPENSES : THAT RS. 23,071/- OUT OF TOTAL EXPENSES OF TRANSPORTATION OF RS. 69,215/- CLAIMED BY THE APPELLANT FIRM HAS BEEN DISALLOWED BY THE LD. AO ON THE PLEA THAT NEITHER T HESE EXPENSES FOUND TO BE VOUCHED NOR COPY OF LEDGER ACCOUNT INDICATE THE PER SON TO WHOM TRANSPORTATION CHARGES WERE PAID AND DID NOT FURNISH THE SUPPORTIN G REGISTER/EVIDENCE. IN THIS REGARD IT IS VERY KINDLY SUBMITTED THAT, ON RECEIPTS OF RS. 99,73,27/- EXPENDITURE OF TRANSPORTATION OF PIPE AND OTHER MAC HINERY FOR RS. 69,215/- IS MOST REASONABLE AND JUSTIFIED. (VI) DISALLOWANCE OUT OF SALARY EXPENSES: IT IS ALSO VERY KINDLY SUBMITTED THAT FULL DETAILS OF SALARY PAYMENT SUCH AS NAMES OF EMPLOYEES, THEIR FATHERS NAME, THEIR ADDR ESS, NATURE OF WORK DONE, MONTHLY SALARY PAYMENT AND SALARY PAID IN PREVIOUS YEAR ETC. WAS SUBMITTED ITA NO. 403/JP/13 & ITA NO/ 369/JP/13 M/S VISHVA KARMA BORING COMPANY, BUNDI VS. ITO, BUND I 10 BEFORE THE LD. AR DURING THE CURSE OF ASSESSMENT PR OCEEDINGS. THIS FACT HAS ALSO BEEN ACKNOWLEDGED BY THE LD. CIT(A). IT WAS T HEN WELL WITHIN HIS POWERS TO HAVE VERIFIED THE PAYMENT OF SALARY FROM ANY EMP LOYEE OF THE FIRM, BUT INSTEAD OF DOING SO HE HAS DISALLOWED SALARY PAYMEN T ON THE MERE ALLEGATION THAT ONLY VOUCHERS AND SALARY REGISTER WERE NOT PRO DUCED WHICH WAS NOT JUSTIFIED AND REASONABLE. THERE IS NO PERVERSITY IN THE ORDER OF THE LD. CIT( A). HE HAS RIGHTLY ALLOWED THE DELETION OF THE SAID DISALLOWANCE BY OBSERVING THAT DESPITE INCREASE IN LABOUR RATES, THERE WAS DECLINE IN LABOUR CHARGERS AS COMP ARED TO PRECEDING YEAR. HE HAS ALSO HELD THAT NOTHING IS ON RECORD TO SHOW THA T THE EXPLANATION GIVEN BY THE APPELLANT WAS INCORRECT. THEREFORE THE APPELLA NT RELIES UPON THE OBSERVATIONS MADE BY THE LD. CIT(A) WITH THE PRAYER THAT DECISION OF THE LD. CIT(A) IN THIS REGARD IS CORRECT UNDER THE FACTS AN D CIRCUMSTANCES OF THE CASE AND THAT THERE WAS NO PERVERSITY. THEREFORE THIS G ROUND OF CROSS APPEAL BY THE DEPARTMENT IS DEVOID OF ANY BASIS AND DESERVE TO BE QUASHED. (I) REGARDING DELETION OF ADDITION OF RS. 4,32,000/- ON ACCOUNT OF UNEXPLAINED SALE PROCEEDS OF TOYOTA QUALIS, IT IS HUMBLY SUBMIT TED THAT FIRST OF ALL SAID TOYOTA QUALIS WAS SOLD BY THE APPELLANT FIRM TO SHR I NIRMAL SINGH S/O NAKSHATRA SINGH ON 10.11.2007 FOR RS. 4,32,000/- WI THOUT ANY WRITTEN AGREEMENT. PAYMENT FOR WHICH WAS MADE BY SHRI NIRM AL SINGH OUT OF SALE PROCEEDS OF HIS AGRICULTURE PRODUCE. PHOTO COPY OF SOME BILLS OF AGRICULTURE PRODUCE SO SOLD BY HIM AT THAT TIME WAS ALSO PRODUC ED BEFORE THE LD. ITO AND ALSO AVAILABLE AT PAGE NO. 32-37 OF PAPER BOOK. TH EREAFTER SHRI NIRMAL SINGH SOLD THIS TOYOTO QUALIS IN THE MONTH OF APRIL,2008 TO SHRI RAMKISHAN SOMANI AND A WRITTEN AGREEMENT WAS EXECUTED BY SHRI KALUL AL ONE OF PARTNER OF THE ITA NO. 403/JP/13 & ITA NO/ 369/JP/13 M/S VISHVA KARMA BORING COMPANY, BUNDI VS. ITO, BUND I 11 APPELLANT FIRM IN THE FAVOUR OF RAMKISHAN SOMANI. IN THIS REGRD IT IS VERY KINDLY SUBMITTED THAT SHRI NIRMAL SINGH HAS PURCHASED SAID TOYOTO QUALIS WITHOUT ANY AGREEMENT AND WHEN HE SOLD THIS TOYOTO QUALISH TO SHRI RAMKISHAN SOMANI, ONE OF PARTNER OF THE APPELLANT FIRM HAS EXECUTED A GREEMENT DIRECTLY IN THE FAVOUR OF SHRI RAMKISHAN SOMANI ON 26.09.2008 ON WH ICH DATE STAMP FOR AGREEMENT WAS PURCHASED BUT DATE OF VALIDITY WAS ME NTIONED AS 01.04.2008 BEING THE DATE ON WHICH SHRI NIRMAL SINGH SOLD THE SAID TOYOTO QUALIS WITHOUT ANY WRITTEN AGREEMENT. THE LD. AOS CONTENTION THA T FACTS MENTIONED BY THE APPELLANT AND STATEMENTS OF BOTH SHRI NIRMAL SINGH AND SHRI RAM KISHAN SOMANI ARE NOT IN AGREEMENT WITH EACH OTHER IS NOT JUSTIFIED SINCE THE REPLY OF OTHER QUESTIONS BOTH HAVE CLEARED ENTIRE POSITION. BOTH SHRI RAMKISHAN SOMANI AND SHRI NIRMAL SINGH HA VE FILED THEIR AFFIDAVITS IN THIS REGARD AND WHEN THEY WERE PRODUCED FOR NECESSA RY EXAMINATION BEFORE THE LD. ITO, BOTH HAVE ADMITTED ALL THESE FACTS IN THEIR STATEMENTS RECORDED BY THE LD. AO. THE LD. CIT(A) HAS RIGHTLY DELETED THE SAID ADDITION BY HOLDING THAT BOTH SHRI NIRML SINGH AND SHRI RAMKISHAN SOMANI HAV E CONFIRMED ABOVE SEQUENCE OF EVENTS IN THEIR RESPECTIVE STATEMENTS A ND THAT NO CONTRADICTION IN THE STATEMENT OF ABOVE TWO PERSONS ARE ON RECORD. (VII) ADDITION ON ACCOUNT OF UNEXPLAINED SALE PROC EEDS OF TOYOTA QUALIS : IT IS SUBMITTED THAT FIRST OF ALL SAID TOYOTA QUALIS WAS SOLD BY THE APPELLANT FIRM TO SHRI NIRMAL SINGH S/O NAKSHATRA SINGH ON 10.11.2007 FOR RS. 4,32,000/- WITHOUT ANY WRITTEN AGREEMENT. PAYMENT FOR WHICH WAS MADE BY S HRI NIRMAL SINGH OUT OF SALE PROCEEDS OF HIS AGRICULTURE PRODUCE. PHOTO COPY OF SOME BILLS OF AGRICULTURE PRODUCE SO SOLD BY HIM AT THAT TIME WAS ALSO PRODUC ED BEFORE THE LD. ITO AND ALSO AVAILABLE AT PAGE NO. 32-37 OF PAPER BOOK. THEREAF TER SHRI NIRMAL SINGH SOLD THIS ITA NO. 403/JP/13 & ITA NO/ 369/JP/13 M/S VISHVA KARMA BORING COMPANY, BUNDI VS. ITO, BUND I 12 TOYOTO QUALIS IN THE MONTH OF APRIL,2008 TO SHRI R AMKISHAN SOMANI AND A WRITTEN AGREEMENT WAS EXECUTED BY SHRI KALULAL ONE OF PART NER OF THE APPELLANT FIRM IN THE FAVOUR OF RAMKISHAN SOMANI. IN THIS REGRD IT I S VERY KINDLY SUBMITTED THAT SHRI NIRMAL SINGH HAS PURCHASED SAID TOYOTO QUALIS WITHO UT ANY AGREEMENT AND WHEN HE SOLD THIS TOYOTO QUALISH TO SHRI RAMKISHAN SOMA NI, ONE OF PARTNER OF THE APPELLANT FIRM HAS EXECUTED AGREEMENT DIRECTLY IN T HE FAVOUR OF SHRI RAMKISHAN SOMANI ON 26.09.2008 ON WHICH DATE STAMP FOR AGREEM ENT WAS PURCHASED BUT DATE OF VALIDITY WAS MENTIONED AS 01.04.2008 BEING THE DATE ON WHICH SHRI NIRMAL SINGH SOLD THE SAID TOYOTO QUALIS WITHOUT ANY WRITT EN AGREEMENT. THE LD. AOS CONTENTION THAT FACTS MENTIONED BY THE APPELLANT AN D STATEMENTS OF BOTH SHRI NIRMAL SINGH AND SHRI RAM KISHAN SOMANI ARE NOT IN AGREEMENT WITH EACH OTHER IS NOT JUSTIFIED SINCE THE REPLY OF OTHER QUESTIONS BOTH HAVE CLEARED ENTIRE POSITION. BOTH SHRI RAMKISHAN SOMANI AND SHRI NIRMAL SINGH HA VE FILED THEIR AFFIDAVITS IN THIS REGARD AND WHEN THEY WERE PRODUCED FOR NECESSA RY EXAMINATION BEFORE THE LD. ITO, BOTH HAVE ADMITTED ALL THESE FACTS IN THEI R STATEMENTS RECORDED BY THE LD. AO. THE LD. CIT(A) HAS RIGHTLY DELETED THE SAID AD DITION BY HOLDING THAT BOTH SHRI NIRML SINGH AND SHRI RAMKISHAN SOMANI HAVE CONFIRME D ABOVE SEQUENCE OF EVENTS IN THEIR RESPECTIVE STATEMENTS AND THAT NO C ONTRADICTION IN THE STATEMENT OF ABOVE TWO PERSONS ARE ON RECORD. 4. THE LD DR IS HEARD WHO HAS ARGUED THE MATTER AT LENGTH AND DRAW OUR ATTENTION TO THE FACT THAT THE AO AFTER REJECTING B OOKS OF ACCOUNTS UNDER SECTION 145(3) HAS EXAMINED THE APPELLANTS CLAIM OF VARIOU S EXPENSES AND HAS MADE ITA NO. 403/JP/13 & ITA NO/ 369/JP/13 M/S VISHVA KARMA BORING COMPANY, BUNDI VS. ITO, BUND I 13 SPECIFIC DISALLOWANCES FOR WANT OF INFORMATION/DOCU MENTS WHICH THE APPELLANT HAS FAILED TO PRODUCE DURING THE ASSESSMENT PROCEED INGS AND ACCORDINGLY, THE AOS ORDER SHOULD BE SUSTAINED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS ARE THAT THE BOOKS OF ACCOUNTS ARE TAKEN AS ACCEPTED AS REVENUE HAS NOT CONTESTED THE SAME. AT THE SAME TIME, WE DO NOT AGREE WITH THE PLEA OF THE LD AR THAT ONLY IN A SCE NARIO WHERE THE BOOKS OF ACCOUNTS ARE REJECTED, DISALLOWANCES/ADDITIONS CAN BE MADE. NEXT PLEA OF THE LD AR IS WHERE THE ADDITIONS ARE SUSTAINED, IT WILL RE SULT IN NET PROFIT RATE OF 20.59% ON GROSS RECEIPTS AS AGAINST 8.38% DECLARED BY THE APPELLANT WHICH WOULD BE ON EXTREMELY HIGHER SIDE CONSIDERING THE NATURE OF THE BUSINESS OF THE APPELLANT WHERE 70.80% OF ITS TOTAL CONTRACT RECEIPTS ARE FRO M GOVERNMENT/GRAM PANCHAYAT WHERE PROFIT MARGIN IS VERY LOW. LD AR FURTHER SUB MITTED THAT IT WOULD BE MORE REASONABLE TO APPLY A REASONABLE NET PROFIT RATE SU BJECT TO INTEREST AND REMUNERATION TO PARTNERS INSTEAD OF DISALLOWING VAR IOUS EXPENSES. WE ARE UNABLE TO ACCEDE TO THE SAID CONTENTION OF THE LD AR. FIR STLY, THE CONTENTION IS NOT BACKED BY ANY FACTS AND FIGURES AND SEGMENTAL RESULTS TO D EMONSTRATE SO CALLED LOW PROFIT MARGINS IN RESPECT OF GOVERNMENT CONTRACTS. SECOND LY, THE BOOKS OF ACCOUNTS HAVE BEEN ACCEPTED IN THE INSTANT CASE AND THERE IS NO QUESTION OF ESTIMATION OF ITA NO. 403/JP/13 & ITA NO/ 369/JP/13 M/S VISHVA KARMA BORING COMPANY, BUNDI VS. ITO, BUND I 14 NP RATE OR ANY COMPARISON THEREOF WITH THE CONSTRUC TION INDUSTRY IN GENERAL OR EVEN WITH THE ASSESSEES PAST RESULTS. IN ANY CASE , THE AO HAS NOT MADE ANY ADHOC NP ADDITION OR ADHOC DISALLOWANCES RATHER HE HAS EXAMINED THE ASSESSEES PROFIT AND LOSS ACCOUNT AND RAISED ISSUES REGARDING SPECIFIC EXPENSES WHICH IN HIS OPINION WARRANT DISALLOWANCES. NOW COMING TO SPECIFIC DISALLOWANCES, IT IS NOTED T HAT LD CIT(A) HAS SUSTAINED THE DISALLOWANCES OF LABOUR, MATADOR HIRE CHARGES, CEME NT/GITTI PURCHASES/EXPENSES AND TRANSPORTATION EXPENSES IN FULL HOLDING THAT TH E FINDINGS OF THE AO HAVE NOT BEEN CONTROVERTED REGARDING THE CLAIM BEING WITHOUT SUPPORTING VOUCHERS OR DOCUMENTARY EVIDENCES. DURING THE COURSE OF HEARIN G, THE LD AR HAS REITERATED ITS SUBMISSIONS BEFORE THE BENCH DRAWING REFERENCE TO C OMPARATIVE POSITION VIS--VIS LAST YEAR. FROM THE PURSUAL OF THE ASSESSMENT ORDE R, IT IS NOTED THAT THE AO HAS EXAMINED EACH OF THESE EXPENDITURE HEADS AND BASED ON SUCH EXAMINATION, IT FOUND THAT CERTAIN EXPENSES UNDER EACH OF THESE HEA DS ARE NOT SUPPORTED BY DOCUMENTARY EVIDENCES. ACCORDINGLY, WE ARE OF THE VIEW THAT LD CIT(A) HAS RIGHTLY SUSTAINED THESE ADDITIONS AND THERE IS NO NEED TO I NTERFERE WITH HIS ORDER. REGARDING DISALLOWANCE ON ACCOUNT OF DIESEL FOR MAC HINERY, IT WAS SUBMITTED BY LD AR THAT THE AO OBSERVATION IN HIS ORDER THAT FROM THE COPY OF LEDGER ACCOUNT OF SAID EXPENSES IT WAS NOTED THAT FICTITIOUS BILL NOS . FOUND TO BE MENTIONED ON VARIOUS DATES IN RESPECT OF DIESEL EXPENSES AGGREGA TING TO RS. 10,74,362/- IS NOT CORRECT BECAUSE WHENEVER DIESEL WAS PURCHASED, BILL NO. HAS BEEN MENTIONED AND VOUCHER NO. PRINTED IN THIS ACCOUNT WERE GENERATED BY COMPUTER AUTOMATICALLY. BOTH BILL NO WHEREVER AVAILABLE AND VOUCHERS NOS. A UTOMATICALLY GENERATED BY ITA NO. 403/JP/13 & ITA NO/ 369/JP/13 M/S VISHVA KARMA BORING COMPANY, BUNDI VS. ITO, BUND I 15 COMPUTER ARE MENTIONED IN LEDGER ACCOUNT IN RESPECT OF THIS EXPENSES WHICH CAN BE VERIFIED FROM THE RECORDS. THE MATTER RELATING TO DISALLOWANCE OF DIESEL EXPENSE IS ACCORDINGLY SET ASIDE TO THE FILE OF THE AO TO EXAMINE THE SAME AFRESH. REGARDING DISALLOWANCE OUT OF SALARY EXPENSES, LD C IT(A) HAS HELD IN HIS ORDER THAT ALL THE DETAILS OF THE EMPLOYEES ALONG WITH ADDRESS AND WORD DONE WERE SUBMITTED TO THE AO AND NO BOGUS SALARY PAYMENTS HA VE BEEN POINTED, ACCORDINGLY, HE DELETED THE ADDITION ON ACCOUNT OF SALARY EXPENSES. DURING THE COURSE OF HEARING BEFORE US, THE SAID FINDING BY TH E LD CIT(A) HAS NOT BEEN CONTROVERTED. HENCE, WE DO NOT FEEL THERE IS A NO NEED FOR US TO INTERFERE WITH THE ORDER OF LD CIT(A) AND THE SAME IS SUSTAINED ON THIS ACCOUNT. LASTLY, REGARDING ADDITION OF RS. 4,32,000/- ON ACC OUNT OF UNEXPLAINED SALE PROCEEDS OF TOYATA QUALIS, IT WAS DELETED BY THE L D. CIT(A) AFTER EXAMINING IN DETAIL THE SEQUENCE OF TRANSACTIONS BETWEEN THE APP ELLANT AND THE BUYER, AND THEREAFTER BETWEEN THE FIRST BUYER AND THE SECOND B UYER. THE LD CIT(A) HAS GIVEN A CLEAR FINDING THAT BASED ON SEQUENCE OF TRANSACTI ONS AND THE AVERMENTS MADE BY ABOVE TWO PERSONS NAMELY NIRMAL SINGH AND RAM KI SHAN, THE APPELLANT HAD ACTUALLY SOLD THE VEHICLE IN CASH FOR RS 432,000 ON 10.11.2007 AND THUS CASH RECEIPTS WAS DULY EXPLAINED AND THE SAME CANNOT BE BROUGHT TO TAX AS UNDISCLOSED INCOME OF THE ASSESSEE. FURTHER, DURING THE COURSE OF HEARING BEFORE US, THE SAID FINDING BY THE LD CIT(A) HAS NOT BEEN CONTROVERTED. HENCE, WE DO NOT FEEL THERE IS A NEED FOR US TO INTERFERE WITH THE ORDER OF LD CIT (A) AND THE SAME IS HEREBY SUSTAINED ON THIS ACCOUNT. ITA NO. 403/JP/13 & ITA NO/ 369/JP/13 M/S VISHVA KARMA BORING COMPANY, BUNDI VS. ITO, BUND I 16 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE AND DEPARTMENT ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE OPEN COURT ON 26 /02 /2016. SD/- SD/- ( R.P. TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 26 / 02 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S VISHVA KARMA BORING COMPANY, BUNDI 2. THE RESPONDENT- THE INCOME TAX OFFICER, BUNDI 3. THE CIT(A), AJMER 4. THE CIT, KOTA 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO SA NO. 403/JP/13 & ITA NO. 36 9/JP/13) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR ITA NO. 403/JP/13 & ITA NO/ 369/JP/13 M/S VISHVA KARMA BORING COMPANY, BUNDI VS. ITO, BUND I 17 SL. NO. DATE INITIAL 1 DATE OF DICTATION 2 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER OTHER MEMBER 3 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S 4 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. 6 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 8 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 9. DATE OF DISPATCH OF THE ORDER