SHRI RAMESH CHAND SHARMA, Kota V. ACIT, Jaipur

ITA 406/JPR/2012

• Counselvise Citation: 40623114 RSA 2012
• Duration Of Justice: 2 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-11-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 30-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: G C JAIN
• Keywords: Depreciation
• Section: 44AD

Judgement Text

ITA NO. 406/JP/2012 SHRI RAMESH CHAND SHARMA VS. ACIT, CIRCLE- 1, KO TA 1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO. 406/JP/2012 ASSESSMENT YEAR: 2006-07 PAN : AGWPS 2292 J SHRI RAMESH CHAND SHARMA VS. THE ACIT 357, SHOPPING CENTRE CIRCLE- 1 KOTA KOTA (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.C. JAIN DEPARTMENT BY: SHRI D.C. SHARMA DATE OF HEARING: 16-09-2014 DATE OF PRONOUNCEMENT: 31-10-2014 ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A), KOTA DATED 20-01-2012 WHEREIN THE ASSESSE E HAS RAISED FOLLOWING GROUND IN HIS APPEAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN:- (I) DIRECTING TO APPLY NET PROFIT RATE OF 8.5% AS A GAINST 4.60% DECLARED BY IGNORING THE FACT OF SUBSTANTIAL INCREASE IN LABOUR AND MATERIAL COST VIS-A-VIS THE PAST HISTORY OF THE CASE. ITA NO. 406/JP/2012 SHRI RAMESH CHAND SHARMA VS. ACIT, CIRCLE- 1, KO TA 2 2.1 THIS APPEAL OF THE ASSESSEE HAS BEEN FILED LATE BY 31 DAYS FOR WHICH THE ASSESSEE HAS FILED CONDONATION APPLICATION CITI NG MEDICAL GROUNDS WHICH ARE SUPPORTED BY MEDICAL CERTIFICATE FROM ORTHOPEDI C SURGEON. 2.2 THE LD. DR IS HEARD. 2.3 WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. T HUS LOOKING AT THE MEDICAL PROBLEM OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE IN DELAYED FILING OF THE APPEAL. THE SAME IS CONDONED AND THE APPEAL OF THE ASSESSEE IS ALLOWED ON MERIT. 3.1 APROPOS BRIEF FACTS OF THE CASE ARE THAT THE AS SESSEE IS A CIVIL CONTRACTOR. THE TOTAL CONTRACT RECEIPTS IN THIS PER IOD ARE RS. 2,20,52,528/-. THE AO REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSE E U/S 145(3) OF THE ACT AND NET PROFIT RATE WAS ESTIMATED AT 9% MINUS DEPRE CIATION. 3.2 AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL BEFORE THE LD. CIT(A) WHERE THE ASSESSEE CONTENDED THAT ITS GROSS PROFIT WAS FAIRLY COMPARABLE TO EARLIER YEARS. RELEVANT FIGURE ARE AS UNDER:- A.Y. GROSS CONTRACT RECEIPTS NET PROFIT NET PROFIT RATE 2003-04 7318484 293248 4% 2004-05 9464496 478297 5.05% 2005-06 30675212 1236125 4.03% 2006-07 22042528 1013406 4.60% ITA NO. 406/JP/2012 SHRI RAMESH CHAND SHARMA VS. ACIT, CIRCLE- 1, KO TA 3 IT WAS FURTHER CONTENDED THAT THERE WAS CUT THROAT COMPETITION IN PWD CONTRACTS DUE TO WHICH ASSESSEE HAD TO QUOTE LOWER RATES ALTHOUGH MATERIAL AND LABOR COST WAS INCREASING. THESE TWO FACTORS WE RE THE REASONS FOR SLIGHT FALL IN NET PROFIT. 3.3 THE LD. CIT(A) AWARDED RELIEF OF RS. 4,24,609/- BY FOLLOWING OBSERVATIONS. I HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND FINDINGS OF THE AO. THE ASSESSEE HAS NOT CHALLENGED THE REJECTION OF BOOKS OF ACCOUNT U/S 145(3), AND RELATED FINDINGS. THE ASSESSEE HAS ONLY REQUESTED FOR CONSIDERING THE FACTS OF GIVING WORK TO SUB-CONTRACTORS ON WHIC H HE EARNED NET PROFIT OF 3.63% ONLY. THE AO HAS NOT TAKEN INTO CONSIDERATION THE FACT OF GIVING PART OF THE WORK ON SUB-CONTRACT STATING THA T SAME WAS NOT LEGALLY ALLOWED. THE ASSESSING OFFICER STA TED THAT FOR THIS REASON THE WORK DONE THROUGH SUB- CONTRACTORS WAS NOT CONSIDERED GENUINE. HOWEVER, TH E ASSESSING OFFICER HAS NOT BROUGHT ANYTHING ON RECOR D TO DISPUTE THE TRANSACTION ON RECORD. AN ILLEGALITY DO ES NOT CHANGE THE CHARACTER OF TRANSACTIONS OR INCREASE TH E PROFIT MARGIN. IN THESE CIRCUMSTANCES THE PLEA OF A SSESSEE THAT PART OF THE WORK WAS DONE THROUGH SUB-CONTRACT ORS CANNOT BE BRUSHED ASIDE AND THE SAME IS TAKEN INTO ACCOUNT WHILE COMPUTING THE PROFIT OF BUSINESS. ITA NO. 406/JP/2012 SHRI RAMESH CHAND SHARMA VS. ACIT, CIRCLE- 1, KO TA 4 THE ASSESSEE WAS ASKED THE DETAILS OF SUB- CONTRACTORS ALONGWITH COPY OF AGREEMENTS, WHICH WER E PRODUCED. THE ASSESSEE ALSO CLAIMED THAT THE SAME WAS FURNISHED BEFORE THE ASSESSING OFFICE. I HAVE GONE THROUGH THE DETAILED FILED BY THE ASSESSEE AND THE COPIES OF AGREEMENT WITH SUB- CONTRACTORS AND FOUND THAT THE PROFIT ON WORK GIVEN TO SUB-CONTRACTORS WAS FIXED AND THESE DETAILS WERE FURNISHED BEFORE THE ASSESSING OFFICER ALSO. THEREF ORE, NET PROFIT RATE SHOULD BE APPLIED ONLY ON BALANCE TURNOVER OF THE ASSESSEE. IN MY VIEW AND AFTER CONSIDERING THE FACTS OF THE CASE A NET PROFIT RATE OF 8.5% IS HELD TO BE REASONABLE. 3.4 AGGRIEVED, THE ASSESSEE IS BEFORE US, LD COUNS EL FOR THE ASSESSE REITERATED THE FACTS AND CONTENDS THAT THE LD. CIT( A) HAS NOT GIVEN PROPER RELIEF TO THE ASSESSEE. THEREFORE, A LENIENT VIEW M AY BE TAKEN. THE LD. AR RELIED ON THE WRITTEN SUBMISSIONS. 3.5 ON THE OTHER HAND, THE LD. DR CONTENDS THAT :- (I) BEFORE THE LD. CIT(A) THE ASSESSEE HAS NOT CHAL LENGED THE REJECTION OF BOOKS OF ACCOUNT. (II) ONLY EFFECTIVE REQUEST MADE BEFORE THE LD. CIT (A) WAS TO CONSIDER THE PORTION OF THE WORK SUB-CONTRACTED BY THE ASSESSEE ON WHICH HE EARNED NET PROFIT RATE AT 3.63%, THE SA ME HAS BEEN ACCORDINGLY REDUCED. (III) FROM THE ORDER OF THE LD. CIT(A), IT DOES NOT APPEAR THAT THE ASSESSEE SERIOUSLY CONTESTED FOR THE PERCENTAGE OF NET PROFIT RATE AT 8.5% MINUS DEPRECIATION. ITA NO. 406/JP/2012 SHRI RAMESH CHAND SHARMA VS. ACIT, CIRCLE- 1, KO TA 5 (IV) THE LD. CIT(A) ACCORDINGLY ACCEPTED THE ASSESS EE'S EFFECTIVE REQUEST AND ON TOP OF THAT THE LD. CIT(A) APPLIED NET PROFIT RATE OF 8.5% AS AGAINST 9% ADOPTED BY THE AO THE LD. DR SUBMITTED THAT THE ORDER OF THE LD. CIT( A) IS MORE REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. 3.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND MERIT IN THE ARGUMENTS OF THE LD. DR , FROM THE ORDER OF THE LD. CIT(A), IT EMERGES THAT ASSESSEE'S MAIN CHALLENGE WAS TO REDUCE NET PROFIT RATE QUA THE SUB-CONTRACTED WORK WHICH HAS BEEN ALLOWED BY THE LD. CIT(A). BESIDES, THE LD. CIT(A) HAS FURT HER REDUCED THE NET PROFIT RATE TO 8.5% FROM 9% ADOPTED BY THE AO AND ALLOWED DEPRECIATION THEREON. THUS IN FACT THE ESTIMATED NET PROFIT FALL IS BEYON D 8% APPLICABLE IN SECTION 44AD AND 44A OF THE ACT. ONCE THE BOOKS OF ACCOUNTS ARE REJECTED THEN ESTIMATE OF INCOME IS INEVITABLE WHICH HAS BEEN REA SONABLY CORRECTED BY THE LD. CIT(A). THE ASSESSEE HAS NOT ADVANCED ANY COGEN T REASONS TO HOLD THAT THE ESTIMATE AS MADE BY THE LD. CIT(A) IS ARBITRARY OR CAPRICIOUS. THUS IN OUR VIEW, THE SAME IS REASONABLE AND AFTER PROPER APPRE CIATION OF THE FACTS AND ARGUMENTS AS LAID BY THE ASSESSEE. IN VIEW THEREOF, WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) WHICH IS U PHELD. THUS THE SOLITARY GROUND OF THE ASSESSEE IS DISMISSED. ITA NO. 406/JP/2012 SHRI RAMESH CHAND SHARMA VS. ACIT, CIRCLE- 1, KO TA 6 4.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31- 10-2014 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 31 ST OCT. 2014 *MISHRA COPY FORWARDED TO:- 1.SHRI RAMESH CHAND SHARMA, KOTA 2. ACIT, CIRCLE- 1, KOTA 3. THE LD. CIT(A) 4. THE LD. CIT BY ORDER 5..THE LD. DR 6.THE GUARD FILE (IT NO. 406/JP/2012) AR ITAT, JAIPUR