M/s. Balwaan Singh & Co., Rohtak V. ITO, Rohtak

ITA 4040/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53082 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 05-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS SRUJANI MOHANTY
• Assessee Lawyers: NARESH GU PTA
• Keywords: Additional evidence
• Section: 44AD; 143(3); 142(1); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI SHAMIM YAHYA ITA NO. 4040/DEL/2011 ASSESSMENT YEAR: 2008-09 M/S. BALWAN SINGH & CO., VS. INCOME-TAX OFFICER, H.NO. 889/29, KAMAL COLONY, WARD 1, ROHTAK. ROHTAK. (PAN: AABFB3521A) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI NARESH GU PTA, ADV. RESPONDENT BY: MRS. SRUJANI MOHA NTY, SR. DR DATE OF HEARING : 03.11.2011 DATE OF PRONOUNCEMENT : 04.11.2011 ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LEARNED CIT(APPEALS) DATED 29.06.2011 PASSED FOR ASSESSMENT YEAR 2008-09. THE GROUNDS OF APPEALS TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH RULE 8 OF THE ITAT'S RULES, THEY ARE DESCRIPTIVE AND ARGUM ENTATIVE IN NATURE. IN BRIEF, ITS GRIEVANCE IS THAT ASSESSING OFFICER HAS ERRED IN DETERMINING THE INCOME OF THE ASSESSEE AT RS.1,50,09,430 AGAINST TH E RETURNED INCOME OF RS.4,64,690 BY REJECTING THE BOOK RESULTS AND APPLY ING A NET PROFIT RATE OF 12% ON THE GROSS CONTRACT RECEIPTS, IGNORING THE PA ST HISTORY OF THE ASSESSEE. 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM. IT DERIVES INCOME FROM THE CIVIL CONSTRUCTION. THE ASS ESSEE FILED E-RETURN, THEREAFTER IT FILED INCOME TAX RETURN VERIFICATION FORM (ITR-V) DECLARING AN INCOME OF RS.4,64,687. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SEC. 143(2) WAS ISSUE D ON 25.8.2009. THIS NOTICE WAS TO BE COMPLIED WITH BY 17 TH SEPTEMBER 2009. ON THIS DATE, SHRI BALWAN SINGHY, PARTNER ALONG WITH SHRI MUKESH HANDA , ADVOCATE APPEARED BEFORE THE ASSESSING OFFICER. THE ASSESSEE DID NOT FILE ANY DOCUMENT EXCEPT POWER OF ATTORNEY IN FAVOUR OF SHRI MUKESH HANDA, A DVOCATE. ASSESSING OFFICER THEREAFTER ISSUED A QUESTIONNAIRE UNDER SEC . 142(1) OF THE ACT ON 17 TH SEPTEMBER 2009 AND FIXED THE HEARING FOR 21.1.2010. SHRI MUKESH HANDA, ADVOCATE ATTENDED THE PROCEEDINGS BUT DID NOT SUBMI T ANY INFORMATION/DOCUMENT. THE HEARING WAS ADJOURNED TO 23 RD APRIL 2010 AGAIN, NO INFORMATION WAS SUBMITTED BY THE ASSESSEE. ASSES SING OFFICER THEREAFTER AGAIN ISSUED NOTICE UNDER SEC. 143(2) DATED 27.9.20 10 FOR 07 TH OCTOBER, 2010. THE HEARING WAS ADJOURNED TO 19.10.2010. ON B OTH THESE DATES, THE ASSESSEE DID NOT SUBMIT ANY DOCUMENT CALLED FOR BY THE ASSESSING OFFICER. ASSESSING OFFICER THEREAFTER WRITTEN A LETTER ON 22 .10.2010 INVITING EXPLANATION OF THE ASSESSEE AS TO WHY ITS INCOME BE NOT ESTIMATED BY APPLYING 12% NET PROFIT RATE ON THE GROSS CONTRACT RECEIPTS. HE ALSO ASKED THE 3 EXPLANATION OF THE ASSESSEE AS TO WHY PENALTY PROCE EDINGS UNDER SEC. 271(1)(B) OF THE ACT BE NOT INITIATED FOR NON-COMPL IANCE OF HIS NOTICES. ASSESSING OFFICER HAS REPRODUCED THIS SUCH SHOW-CAU SE NOTICE ON PAGE 2 OF THE ASSESSMENT ORDER. IN RESPONSE TO THIS NOTICE, T HE PARTNER ATTENDED BEFORE THE ASSESSING OFFICER BUT DID NOT FURNISH ANY DOCUM ENT OR WRITTEN SUBMISSIONS. ASSESSING OFFICER HAS OBSERVED THAT AS SESSEE HAS SHOWN SUNDRY CREDITORS OF RS.2,30,20,568. IT FAILED TO GIVE COMP LETE ADDRESSES OF THESE CREDITORS. THE HAS SHOWN BANK BALANCES ALSO BUT DID NOT FURNISH COPIES OF THE BANK STATEMENTS. IT HAS DEBITED EXPENSES TOWARDS CO ST OF MATERIAL, LABOUR/WAGES, RENT OF SHUTTERING AND TOOLS ETC. BUT FAILED TO SUBMIT THE SUPPORTING VOUCHERS, BILLS ETC. FACED WITH THIS SIT UATION, ASSESSING OFFICER PROCEEDS TO ASSESS THE INCOME OF THE ASSESSEE UNDER SEC. 144 OF THE ACT, ACCORDING TO HIS BEST JUDGMENT. HE FOUND THAT THE A SSESSEE HAS A GROSS RECEIPTS OF RS.12,24,63,743. THE ASSESSING OFFICER HAS APPLIED NET PROFIT RATE OF 12% ON THESE GROSS RECEIPTS AND WORKED OUT AN ESTIMATED INCOME AT RS.1,46,95,650. HE FURTHER MADE AN ADDITION OF INTE REST INCOME ON THE FDR. IN THIS WAY, TOTAL INCOME OF THE ASSESSEE HAS BEEN DETERMINED AT RS.1,50,09,430. 4 3. DISSATISFIED WITH THE DETERMINATION OF INCOME, A SSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(APPEALS). I T CHALLENGED THE ACTION OF ASSESSING OFFICER FOR PASSING THE ASSESSMENT ORDER ACCORDING TO HIS BEST JUDGMENT UNDER SEC. 144 OF THE ACT. IT CHALLENGED T HE ESTIMATION OF INCOME BY APPLICATION OF NET PROFIT RATE AT 12% ON THE GRO SS RECEIPTS. IT ALSO CHALLENGED NON-ALLOWANCE OF SALARY AND INTEREST TO THE PARTNERS FROM THE INCOME OF THE FIRM UNDER SEC. 40(B) OF THE ACT. LEA RNED CIT(APPEALS) HAS REJECTED ALL THE CONTENTIONS OF THE ASSESSEE AND UP HELD THE ORDER OF THE ASSESSING OFFICER. HIS FINDINGS READ AS UNDER: 5. I HAVE CONSIDERED THE ISSUE AND THE SUBMISSION S MADE BY THE AR. THE APPELLANT FAILED TO GIVE THE CIRCUMSTANCES ALONGWITH REQUISITE EVIDENCES FOR NOT BEING ABLE TO PRODUCE THE BOOKS O F ACCOUNT AND THE INFORMATION SOUGHT BY THE A.O., INSPITE OF REPEATED OPPORTUNITIES GIVEN BY THE A.O. THEREFORE, THIS ARGUMENT IS DISMI SSED AS WITHOUT ANY SUBSTANCE. THE AR STATED BEFORE ME THAT THE BOO KS OF ACCOUNT MAY BE ALLOWED TO BE PRODUCED BEFORE ME OR THE A.O, IS I SO DIRECT. IT IS NOT UNDERSTANDABLE AS TO THE NATURE OF MY DIRECT ION IN THIS REGARD. IF THE APPELLANT WANTED TO PRODUCE THE BOOKS OF ACCOUN T, THEN HE SHOULD HAVE MOVED SUITABLE APPLICATION IN TERMS OF THE REL EVANT RULES. HOWEVER, NO SUCH APPLICATION HAS BEEN MOVED BY THE APPELLANT AND THEREFORE, THE QUESTION OF ALLOWING OR DISALLOWING THE PRODUCTION OF BOOKS OF ACCOUNT DOES NOT ARISE. 5 5.1 IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT TH E A.O. HAS GIVEN A NUMBER OF OPPORTUNITIES TO THE APPELLANT TO PRODUCE THE BOOKS OF ACCOUNT ALONGWITH BILLS/VOUCHERS AND FURNISH THE IN FORMATION SOUGHT FOR. IN VIEW OF THE NON COOPERATIVE ATTITUDE OF THE APPELLANT, THE A.O. HAD NO ALTERNATIVE BUT TO COMPLETE THE ASSESSMENT T O HIS BEST JUDGMENT. THEREFORE, THE ACTION OF THE A.O. IN COMP LETING THE ASSESSMENT U/S 144 IS UPHELD. 5.2 COMING TO THE ISSUE OF ESTIMATION OF PROFIT, THE AR SUBMITTED BEFORE ME THAT THE BOOK RESULTS NEVER EXCEEDED 2% O F THE GROSS RECEIPTS AND FURTHER IN THIS LINE OF BUSINESS, THE RATE OF PROFIT IS BELOW 3% OF THE TURNOVER. HOWEVER, NO DETAILS/BASIS IN TH IS REGARD HAVE BEEN FURNISHED BY THE AR. IN THE ABSENCE OF ANY SUCH DET AIL/INFORMATION BEING PROVIDED BY THE APPELLANT, THE PROFIT HAS TO BE ESTIMATED AS GENERALLY APPLICABLE TO THE CONTRACTORS. ON THE CON TENTION THAT THE FACTS OF M/S. PRABHAT KUMAR CONTRACTOR, SIRSA ARE T OTALLY DIFFERENT FROM THAT OF THE APPELLANT, THE AR HAS NOT FURNISHE D ANY DETAILS AS TO HOW THE FACTS ARE DIFFERENT. THOUGH SECTION 44AD PR ESCRIBES PROFIT RATE OF 8%, IT IS ONLY IN THE CASES OF TURNOVER BEI NG LESS THEN RS.40.00 LACS AND NON-MAINTENANCE OF BOOKS OF ACCOUNT AND TH EREFORE, THIS PROFIT RATE CAN NOT BE APPLIED TO THE APPELLANT. 5.3 HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, ESTIMATION OF PROFIT @12% ON THE GROSS RECEIPTS APP EARS TO BE FAIR AND REASONABLE IN THE LINE OF CONTRACTS OF THE APPELLAN T. THEREFORE, ESTIMATION OF PROFIT @ 12% BY THE A.O. IS SUSTAINED . HOWEVER, THE 6 MATERIAL SUPPLIED AND THE SALES TAX DEDUCTED BY THE GOVT. DEPARTMENTS NEEDS TO BE REDUCED FROM THE GROSS TURNOVER BEFORE APPLYING THE PROFIT RATE OF 12%. THE A.O. IS THEREFORE, DIRECTED TO WOR KOUT THE PROFIT ACCORDINGLY. AS REGARDS THE CONTENTIONS OF ALLOWING INTEREST ON PARTNERS CAPITAL AND SALARY TO THE PARTNERS, NO CAS E HAS BEEN MADE OUT BY THE AR AS TO WHY THEY SHOULD BE REDUCED FROM THE PROFIT ESTIMATES AND THEREFORE, THIS CONTENTION IS DISMISSED. THE GR OUNDS OF APPEAL ARE DISPOSED OFF AS INDICATED ABOVE. 4. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT THE ISSUE IN DISPUTE IS COVERED IN FAVOUR OF THE AS SESSEE BY THE ORDER OF THE ITAT PASSED IN ITA NO.1627/DEL/2010 FOR ASSESSMENT YEAR 2006-07 AND ITA NO. 2299/DEL/2010 FOR ASSESSMENT YEAR 2007-08. HE SUBMITTED THAT IN BOTH THESE ASSESSMENT YEARS, AN EX PARTE ASSESSMENT ORDER WAS PASSED UNDER SECTION 144 OF THE ACT AND THE ITAT HAS SET ASIDE T HE ORDERS OF THE LEARNED REVENUE AUTHORITIES. THE ITAT HAS REMITTED THE ISSU E TO THE FILE OF THE ASSESSING OFFICER FOR READJUDICATION. HE PRAYED THA T IN THIS ASSESSMENT YEAR ALSO, THE ORDERS OF REVENUE AUTHORITIES BELOW BE SE T ASIDE AND THE ISSUES BE RESTORED TO THE FILE OF THE ASSESSING OFFICER. ON T HE OTHER HAND, LEARNED DR SUBMITTED THAT THE ASSESSING OFFICER HAS GIVEN SUFF ICIENT OPPORTUNITIES TO THE ASSESSEE. IT FAILED TO AVAIL THOSE OPPORTUNITIES. IT HAS NOT ASSIGNED ANY REASON AS TO WHY IT WAS NOT POSSIBLE FOR THE ASSESS EE TO PROSECUTE THE 7 PROCEEDINGS AND SUBMIT THE REQUISITE DETAILS BEFOR E THE ASSESSING OFFICER. LEARNED DR FURTHER SUBMITTED THAT BEFORE THE LEARNE D CIT(APPEALS), ASSESSEE EVEN DID NOT SOUGHT TO PLACE THE DETAILS O N RECORD AND FILED AN APPLICATION FOR PERMISSION TO LEAD ADDITIONAL EVIDE NCE. SHE MADE A REFERENCE TO THE OPENING REMARK OF LEARNED CIT(APPEALS) IN PA RAGRAPH NO.5 WHEREIN LEARNED FIRST APPELLATE AUTHORITY HAS OBSERVED THAT ASSESSEE FAILED TO GIVE CIRCUMSTANCE ALONGWITH REQUISITE EVIDENCE FOR NOT B EING ABLE TO PRODUCE THE BOOKS OF ACCOUNT AND THE INFORMATION SOUGHT BY THE ASSESSING OFFICER INSPITE OF REPEATED OPPORTUNITIES GIVEN BY THE ASSE SSING OFFICER. SHE EMPHASIZED THAT EVEN BEFORE THE ITAT, ASSESSEE HAS NOT SUBMITTED THE DETAILS NOR SOUGHT PERMISSION TO FILE ADDITIONAL EV IDENCE. 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. DURING THE COURSE OF HEARING, WE HAVE CONFRONTED THE LEARNED COUNSEL FOR THE ASSESSEE TO SHOW THE REASON S OF THE FAILURE OF THE ASSESSEE TO SUBMIT REQUISITE DETAILS BEFORE THE ASS ESSING OFFICER. HE EXPRESSED THE INABILITY TO SHOW ANY REASON. ADMITTE DLY, ASSESSING OFFICER HAS GIVEN NUMBER OF OPPORTUNITIES TO THE ASSESSEE. THE PARTNER AS WELL AS THE LEARNED COUNSEL FOR THE ASSESSEE WERE AWARE ABOUT T HE ASSESSMENT PROCEEDINGS. THEY HAVE ATTENDED THE PROCEEDINGS BUT DID NOT SUBMIT THE 8 BOOKS OF ACCOUNT OR OTHER DETAILS. RULE 46A OF THE INCOME-TAX RULES, 1962 PROVIDES A MECHANISM FOR PRODUCTION OF ADDITIONAL E VIDENCE BEFORE THE LEARNED FIRST APPELLATE AUTHORITY. SIMILARLY, RULE 29 OF THE ITAT RULES, CONTEMPLATES PRODUCTION OF ADDITIONAL EVIDENCE BEFO RE THE ITAT IN THE SECOND APPELLATE STAGE. RULE 46A STARTS WITH EXPRES SION THAT APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE LEARNED FIRST APPELLATE AUTHORITY ANY EVIDENCE WHETHER ORAL OR DOCUMENTARY, OTHER THAN TH E EVIDENCE PRODUCED BY HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS EXC EPT IN THE CIRCUMSTANCES PROVIDED IN SUB-RULE (1). SIMILARLY, RULE 29 OF THE ITATS RULES, PROVIDES THAT PARTIES TO THE APPEAL SHALL NO T BE ENTITLED TO PRODUCE ADDITIONAL EVIDENCE EITHER OR DOCUMENTARY EVIDENCE BEFORE THE ITAT. BOTH THESE RULES CONTEMPLATE SPECIFIC CONDITION WHERE AD DITIONAL EVIDENCE WOULD BE PERMITTED TO PRODUCE. IN RULE 46A, SUCH CONDITIO NS ARE (A) WHERE ASSESSING OFFICER REFUSED TO ADMIT EVIDENCE WHICH O UGHT TO HAVE BEEN ADMITTED; (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE CALLED UPON TO PROD UCE BY THE ASSESSING OFFICER; (C) WHERE THE ASSESSEE WAS PREVENTED BY SU FFICIENT CAUSE FROM PRODUCING BEFORE THE ASSESSING OFFICER ANY EVIDENCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL OR (D) WHERE THE ASSESSING OFF ICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUN ITIES TO THE ASSESSEE TO 9 ADDUCE EVIDENCE RELEVANT TO ANY OF APPEAL. THE ASSE SSEE HAS NEITHER FILED ANY AFFIDAVIT OF THE PARTNER DEMONSTRATING THE FACT THA T IT WAS PROHIBITED BY SUFFICIENT REASON FOR NOT COMPLYING WITH THE DIRECT IONS OF THE ASSESSING OFFICER NOR IT HAS SOUGHT ANY PERMISSION OF THE LEA RNED CIT(APPEALS) TO ADDUCE SUCH EVIDENCE AT THE FIRST APPELLATE STAGE. SIMILARLY, BEFORE ITAT ALSO, IT HAS NOT PLACE ON RECORD ANY MATERIAL INDI CATING THE FACT THAT IT WAS PREVENTED BY SUFFICIENT REASONS FOR NOT COMPLYING W ITH THE QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER. 6. IT IS NOT THE POSITION OF LAW THAT MERELY AN ASS ESSMENT ORDER HAS BEEN PASSED UNDER SEC. 144 OF THE INCOME-TAX ACT, 1961 A CCORDING TO THE BEST JUDGMENT OF THE ASSESSING OFFICER IT WOULD BE SET A SIDE AND ISSUE WOULD BE REMITTED TO THE FILE OF THE ASSESSING OFFICER, FOR READJUDICATION. THE ASSESSEE HAS TO DEMONSTRATE THAT THERE WAS NO NEGLIGENCE AT THE PART OF THE ASSESSEE IN CONDUCTING THE PROCEEDINGS BEFORE THE ASSESSING OFF ICER AND SUCH PROCEEDINGS WERE TAKEN EX PARTE ERRONEOUSLY BY THE ASSESSING OFFICER. LET US SEE THE CONDUCT OF THE ASSESSEE. IN ASSESSMENT Y EAR 2006-07, IT DID NOT FILE ANY DETAIL BEFORE THE ASSESSING OFFICER. THE DISPUT E TRAVELED UP TO THE ITAT. CONSIDERING THE TAX LIABILITY VIS--VIS ITS NEGLIGE NCE, ITAT HAS SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER. THIS OR DER WAS PASSED ON 10 11.6.2010 AND PRIOR TO THAT LEARNED CIT(APPEALS) HA S DISMISSED ITS APPEAL IN THAT ASSESSMENT YEAR ON 18.1.2010, MEANING THEREBY THE ASSESSEE WAS FACING A SIMILAR HARDSHIP IN ASSESSMENT YEAR 2006-07. IN A SSESSMENT YEAR 2007-08 AGAIN, ITAT HAS PASSED THE ORDER ON 23 RD JULY 2010. THESE FACTORS MUST BE IN THE KNOWLEDGE OF THE ASSESSEE, INSPITE OF THAT IN T HE YEAR 2010 ITSELF BEFORE THE ASSESSING OFFICER IT AGAIN DID NOT SUBMIT THE D ETAILS. IN SUCH SITUATION, GIVING ONE MORE OPPORTUNITIES TO THE ASSESSEE WOULD AMOUNT TO VIOLATION OF RULE 46A OF THE IT RULES AS WELL AS RULE 29 OF THE ITAT RULES. WHEN THE ASSESSEE COULD NOT BE IN A POSITION TO PRODUCE THE PROCEDURAL MECHANISM DIRECTLY UNDER THOSE RULES, THEN IT IS NOT ADVISEAB LE TO PERMIT TO PRODUCE SUCH DETAILS INDIRECTLY. IT ALSO FAILED TO DEMONSTRATE A NY SUBSTANTIAL INJUSTICE MET WITH IT BY THE ASSESSING OFFICER IN CONDUCTING THE PROCEEDINGS. THEREFORE, WE DO NOT FIND ANY FORCE IN THE FIRST FOLD OF SUBMI SSIONS THAT SUFFICIENT OPPORTUNITIES WERE NOT GRANTED TO THE ASSESSEE AND THE ISSUE DESERVES TO BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. 7. THE NEXT ISSUE WHICH REQUIRED TO BE ADJUDICATED IS WHETHER NET PROFIT RATE APPLIED BY THE ASSESSING OFFICER IS JUSTIFIABL E OR NOT? ASSESSING OFFICER HAS APPLIED NET PROFIT RATE OF 12% ON THE GROSS REC EIPTS. FOR THIS PURPOSE, HE MADE A REFERENCE TO THE DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT 11 IN THE CASE OF CIT, HISSAR VS. PARBHAT KUMAR, CONTR ACTOR OF SIRSA (HR.) IN ITA NO. 293 OF 2008 DECIDED ON 14.11.2008. THE LEAR NED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER FAILE D TO CONSIDER THE PAST HISTORY OF THE ASSESSEE WHILE APPLYING THE NET PROF IT RATE UPON THE GROSS CONTRACT RECEIPTS. HE MADE A REFERENCE TO SEC. 44AD OF THE ACT AND POINTED OUT THAT THOUGH THIS SECTION IS APPLICABLE UPON THO SE ASSESSEES, WHO ARE ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND T HEIR GROSS RECEIPTS DOES NOT EXCEEDS RS.40 LACS. BUT IT CAN BE A GUIDING FAC TOR FOR DETERMINING THE INCOME OF ANY OTHER CIVIL CONTRACTORS IN THE ABSENC E OF ANY CONCRETE MATERIAL. WE HAVE CONFRONTED THE LEARNED COUNSEL FOR THE ASSE SSEE TO POINT OUT AS TO WHICH PERCENTAGE ACCORDING TO THE ASSESSEE WOULD ME T THE ENDS OF JUSTICE. HE CONCEDED THAT IF INCOME IS DETERMINED BY APPLICA TION OF NET PROFIT RATE OF 8% ON THE TOTAL GROSS RECEIPTS THEN ASSESSEE WOULD HAVE NO GRIEVANCE. ON THE OTHER HAND, LEARNED DR SUBMITTED THAT 8% RATE IS AP PLICABLE FOR THOSE ASSESSEES WHOSE GROSS RECEIPT IS LESS THAN RS. 40 L ACS. IN THE CASE OF ASSESSEE, GROSS RECEIPT IS OF MORE THAN RS. 12 CRORES, THEREF ORE, THE PROFIT RATE ADOPTED BY THE ASSESSING OFFICER OF 12% IS QUITE REASONABLE . SHE RELIED UPON THE ORDER OF LEARNED CIT(APPEALS) ON THIS ISSUE. 12 8. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. IN VARIOUS AUTHORITATIVE PRONOUNC EMENTS, IT HAS BEEN HELD THAT BEST JUDGMENT AT THE END OF THE ASSESSING OFFI CER IS NOT A PROVISIONS TO PENALIZE THE ASSESSEE FOR FAILURE TO FILE THE RETUR N OR TO COMPLETE WITH THE QUESTIONNAIRE. IT IS A MACHINERY PROVISION TO ENABL E THE REVENUE TO ASSESS A PERSON WHEN SITUATION WARRANTS AN ASSESSMENT. THUS, THE ORDER UNDER SEC. 144 IS TO BE MADE ACCORDING TO THE BEST JUDGMENT OF THE ASSESSING OFFICER, WHICH MEANS, THE ORDER HAS TO BE RATIONAL AND IT HA S TO BE PASSED ON AN HONEST GUESS WORK FOR WHICH SOME VALID BASIS IS AVA ILABLE TO THE ASSESSING OFFICER. ASSESSING OFFICER HAS TO MAKE A FAIR ESTIM ATE OF THE INCOME OF THE ASSESSEE. FOR THIS PURPOSE, HE IS REQUIRED TO LOOK INTO PAST HISTORY OF THE ASSESSEE, RESULTS SHOWN BY THE OTHER SIMILARLY SITU ATED ASSESSEES AND IF THERE IS ANY PROVISION FOR GUIDANCE. ASSESSING OFFICER HA S ADOPTED THE RATE OF 12% NET PROFIT BY MAKING A REFERENCE TO THE JUDGMENT OF THE HON'BLE PUNJAB AND HARYANA HIGH COURT BUT HE HAS NOT REFERRED THE FACT S AND CIRCUMSTANCES OF THAT CASE. THIS CAN BE A ONE GUIDING FACTOR BUT THE FACTS SHOULD BE SIMILAR. THE OTHER CORROBORATIVE FACTOR IS NET PROFIT RATE P ROVIDED IN SEC. 44AD OF THE ACT. THOUGH STRICTLY THIS SECTION IS NOT APPLICABLE FOR COMPUTING THE INCOME OF PRESENT ASSESSEE BUT IN THE ABSENCE OF OTHER REL EVANT DETAILS AND THE BOOKS OF ACCOUNT, IT CAN BE A GUIDING FACTOR BECAUSE THE LEGISLATURE HAS ABSOLVED 13 SMALL ASSESSEE FOR MAINTAINING HASSLE OF THE BOOKS OF ACCOUNT. THEY CAN SHOW THEIR INCOME @ 8% OF GROSS RECEIPTS IN CASE TH EIR RECEIPTS ARE LESS THAN RS. 40 LACS. THUS, THIS BENCHMARK CAN BE APPLIED AF TER APPLYING CERTAIN FILTERS ON OTHER ASSESSEES ALSO WHOSE TURNOVER IS M ORE BUT FAILED TO MAINTAIN THE BOOKS OF ACCOUNT. ACCORDING TO THE ASSESSEE, IT S PROFIT NEVER EXCEEDS 2% TO 3%. LEARNED CIT(APPEALS) REJECTED THIS CONTENTIO N OF ASSESSEE ON THE GROUND THAT NO DETAILS OR BASIS IN THIS REGARD HAS BEEN FURNISHED BY THE ASSESSEE. HOWEVER, WE HAVE GONE THROUGH THE ITATS ORDER IN ASSESSMENT YEAR 2006-07. THE ITAT IN PARAGRAPH NO.3 HAS REPRO DUCED DETAILS IN TABULAR FORM FOR ASSESSMENT YEAR 2001-02 UP TO ASSE SSMENT YEAR 2005-06. IN THESE DETAILS, ITAT NOTICED GROSS RECEIPTS, RETURNE D INCOME, ADDITIONS MADE BY THE ASSESSING OFFICER ETC. FROM THESE DETAILS, IT REVEALED THAT IN ASSESSMENT YEARS 2001-02 AND 2005-06, INCOME OF THE ASSESSEE HAS BEEN ASSESSED UNDER SEC. 143(3) AT ITO WARD-I, ROHTAK. T HE PHOTOCOPIES OF THE ASSESSMENT ORDER WERE ATTACHED IN THOSE PROCEEDINGS . PROFIT RATE OF THE ASSESSEE IN THOSE YEARS HAVE BEEN ACCEPTED ACCORDIN G TO THE DETAILS REPRODUCED BY THE ITAT, AT 0.75% AND 0.94%. THUS, T AKING INTO CONSIDERATION THE CUMULATIVE EFFECT OF ALL THESE FA CTORS I.E. SECTION 44 AD, PAST HISTORY AND THE STAND OF LEARNED COUNSEL FOR T HE ASSESSEE, THAT ASSESSEE WOULD BE SATISFIED IF ITS INCOME IS DETERMINED BY A PPLICATION OF 8% NET PROFIT 14 RATE ON THE GROSS RECEIPTS. WE ALLOW THIS FOLD OF S UBMISSION PARTLY AND MODIFY THE ASSESSMENT ORDER. WE DIRECT THE ASSESSIN G OFFICER TO COMPUTE THE INCOME OF ASSESSEE BY ADOPTING NET PROFIT RATE OF 8% OVER THE GROSS CONTRACT RECEIPTS. 9. APART FROM THIS ONE FOLD OF GRIEVANCE, PLEADED I N GROUND NOS. 1 TO 5, 7 & 8, ASSESSEE HAS RAISED GROUND NO.6 WHEREIN IT H AS PLEADED THAT ASSESSING OFFICER HAS ERRED IN NOT ALLOWING SALARY AND INTERE ST TO THE PARTNERS FROM THE INCOME OF THE FIRM UNDER SEC. 40(B) OF THE ACT. THE ASSESSEE HAS TAKEN A SPECIFIC GROUND OF APPEAL BEFORE THE LEARNED FIRST APPELLATE AUTHORITY ALSO. WE FIND THAT THE LEARNED CIT(APPEALS) HAS REJECTED THE GROUNDS RAISED BY THE ASSESSEE ON THE GROUND THAT NO CASE HAS BEEN MA DE OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE. IN OUR OPINION, LEARNED FIRST APPELLATE AUTHORITY FAILED TO TAKE COGNIZANCE OF SECTION 40(B) OF THE A CT AND FAILED TO ADJUDICATE THE ISSUE AS TO WHY SALARY AND INTEREST ON PARTNERS CAPITAL COULD NOT BE ALLOWED. THEREFORE, WE REMIT THIS ISSUE TO THE FILE OF THE LEARNED CIT(APPEALS) FOR READJUDICATION. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. SD/- SD/- ( SHAMIM YAHYA ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 04/11/2011 MOHAN LAL 15 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR