The ACIT, Circle-1, RAJKOT-GUJARAT V. M/s. Shanti Construction Co., JUNAGADH

ITA 419/RJT/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0071 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 07-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C. S. ANJARIA
• Keywords: Rejection of books of accounts
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 44AD; 11; 15; 271(1)(b); 139; 92; 145(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AH MEDABAD] (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA. NO: 419/RJT/2013 & C.O. NO. 07/RJT/14 (ASSESSMENT YEAR: 2009-10) THE A.C.I.T., CIRCLE-1, JUNAGADH M/S. SHANTI CONSTRUCTION CO. 112, SHRIDHAR NAGAR, NR. TRIVENI APPT., B/H. LAL BAUG, JUNAGADH PAN NO. AAHFS4630F V/S V/S M/S. SHANTI CONSTRUCTION CO. 112, SHRIDHAR NAGAR, NR. TRIVENI APPT., B/H. LAL BAUG, JUNAGADH PAN NO. AAHFS4630F THE A.C.I.T., CIRCLE-1, JUNAGADH (APPELLANT) (RESPONDENT) ITA. NOS: 618 & 619/RJT/2014 & C.O. NOS. 08 & 09/RJT/14 (ASSESSMENT YEAR: 2010-11 & 2011-12) THE A.C.I.T., CIRCLE-1, JUNAGADH M/S. SHANTI CONSTRUCTION CO. 112, SHRIDHAR NAGAR, NR. TRIVENI APPT., B/H. LAL BAUG, JUNAGADH V/S V/S M/S. SHANTI STRUCTURE PVT. LTD. 112, SHRIDHAR NAGAR, NR. TRIVENI APPT., B/H. LAL BAUG, JUNAGADH PAN NO. AANCS5661D THE A.C.I.T., CIRCLE-1, JUNAGADH ITA NOS. 419 /RJT/13, 618 & 619/RJT/14 & C.O. NO. 07/ RJT 2014, 08 & 09/RJT/15 A.YS. 2009-10 TO 2011-12 2 PAN NO. AANCS5661D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI C. S. ANJARIA, D.R. RESPONDENT BY : SHRI VIMAL DESAI, C.A. ( )/ ORDER DATE OF HEARING : 21 -11-201 6 DATE OF PRONOUNCEMENT : 24 -11-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. ITA NOS. 419/RJT/2013, 618/RJT/2014 & 619/RJT/2014 ARE APPEALS BY THE REVENUE IN RESPECT OF TWO DIFFERENT ASSESSEES DIREC TED AGAINST THE SEPARATE ORDERS OF LD. CIT(A)-IV, RAJKOT AND C.O. NOS. 07/RJ T/14, 08/RJT/2015 & 09/RJT/2015 ARE CROSS OBJECTIONS OF THE ASSESSEE PR EFERRED AGAINST THE VERY SAME ORDER OF THE LD. CIT(A). 2. ALL THESE APPEALS WERE HEARD TOGETHER AS THEY INVOL VED COMMON ISSUES AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE O F CONVENIENCE. 3. AT THE VERY OUTSET, THE LD. D.R. STATED THAT FACTS IN UNDERLINED ISSUES ARE IDENTICAL IN ALL THE IMPUGNED APPEALS. THEREFORE, W E HAVE HEARD THE LD. D.R. ON THE FACTS OF ITA NO. 419/RJT/2013 PERTAINING TO A.Y. 2009-10. 4. ASSESSEE IS IN THE BUSINESS OF CIVIL CONSTRUCTION B EING A GOVERNMENT CONTRACTOR. DURING THE COURSE OF THE SCRUTINY ASSES SMENT PROCEEDINGS AND ITA NOS. 419 /RJT/13, 618 & 619/RJT/14 & C.O. NO. 07/ RJT 2014, 08 & 09/RJT/15 A.YS. 2009-10 TO 2011-12 3 THE A.O. NOTICED THAT THE ASSESSEE HAS NOT MAINTAIN ED CERTAIN SUPPLEMENTARY BOOKS OF ACCOUNTS NAMELY STOCK MOVEME NT REGISTER, LOGBOOK FOR VEHICLES, SEPARATE LABOUR PAYMENT REGIS TER. THE A.O. ALSO NOTICED THAT THE ASSESSEE HAS PURCHASED FROM UNREGI STERED DEALERS. THE A.O. OBSERVED THAT EVEN THE WORK-IN-PROGRESS HAS BE EN VALUED ON ESTIMATION BASIS. 5. INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T, THE A.O. REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE PROFIT OF THE A SSESSEE AS UNDER:- (A) 5% OF CONTRACT RECEIPTS AS SUB-CONTRACT (B) 8% OF THE CONTRACT RECEIPTS AS MAIN CONTRACTOR (C) 3% OF THE BALANCE CONTRACT RECEIPTS FOR WHICH A SSESSEE GOT THE WORK DONE ON CONTRACT BASIS FROM OTHERS AND COMPLETED TH E ASSESSMENT BY MAKING THE IMPUGNED ADDITIONS. 6. ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE LD . CIT(A) AND STRONGLY CONTENDED THAT IN THE BOOKS OF CIVIL CONTRACTS, IT IS IMPRACTICABLE TO MAINTAIN QUANTITATIVE DETAILS OR STOCK REGISTER DUE TO LARGE NUMBER OF ITEMS HAVING SMALL VALUES AT DIFFERENT SITES. IT WAS FURT HER CONTENDED THAT IN THE TAX AUDIT REPORT QUANTITATIVE DETAILS ARE TO BE GIV EN IN RESPECT OF MANUFACTURING AND TRADING CONCERNS ONLY. IT WAS BRO UGHT TO THE NOTICE OF THE LD. CIT(A) THAT MAINTAINING BOOKS, ACCORDING TO THE A.O., IS NOT ONLY IMPRACTICABLE BUT ALSO MAKES APPORTIONMENT OF COMMO N EXPENDITURE COMPLEX AND UNMANAGEABLE. NON-MAINTENANCE OF LOGBOO KS FOR VEHICLES WOULD NOT JUSTIFY THE REJECTION OF THE BOOKS OF ACC OUNTS. ITA NOS. 419 /RJT/13, 618 & 619/RJT/14 & C.O. NO. 07/ RJT 2014, 08 & 09/RJT/15 A.YS. 2009-10 TO 2011-12 4 7. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) OBSERVED THAT THE QUANTUM OF URD PURCHASES IS MARGINAL. THE LD. CIT(A) FURTHER OBSERVED THAT THE YARDSTICK OF SECTION 44AD IS EXPR ESSLY NOT APPLICABLE TO THE CASES WHERE RECEIPTS EXCEED RS. 40 LACS, AND TH ERE IS NO BASIS WHATSOEVER FOR ASSUMPTION OF NET PROFIT IN CASE OF SUB-CONTRACTED WORK AND WORK EXECUTED AS SUB-CONTRACTOR. 8. DRAWING SUPPORT FROM THE FINDINGS GIVEN BY THE A.O. IN A.Y. 2008-09, WHEREIN A LUMP SUM ADDITION OF RS. 1.50 LACS WAS MA DE, THE LD. CIT(A) WAS CONVINCED THAT A LUMP SUM ADDITION OF RS. 3 LACS WO ULD BE APPROPRIATE IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND A CCORDINGLY DIRECTED THE A.O. TO RESTRICT THE ADDITION TO THE EXTENT OF RS. 3 LACS ONLY. 9. AGGRIEVED BY THIS, THE DEPARTMENT IS IN APPEAL BEFO RE US AND THE ASSESSEE HAS PREFERRED CROSS OBJECTION. 10. THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O. LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 11. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. PROVISIONS OF SECTION 145(3) ARE APPLICABLE WHEN THE ASSESSING OFFICER WAS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR WHEN THE METHOD OF ACCO UNTING HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE. ONLY THEN THE A .O. MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144 OF THE ACT. A PERUSAL OF ITA NOS. 419 /RJT/13, 618 & 619/RJT/14 & C.O. NO. 07/ RJT 2014, 08 & 09/RJT/15 A.YS. 2009-10 TO 2011-12 5 THE IMPUGNED ASSESSMENT ORDER SHOWS THAT NOWHERE TH E ASSESSING OFFICER HAS DOUBTED THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE. MERELY BECAUSE DUE TO PRACTICAL DIFFICULT Y IN THE LINE OF BUSINESS, THE ASSESSEE COULD NOT PROVIDE THE STOCK MOVEMENT R EGISTER OR VEHICLE LOG REGISTER WOULD NOT IPSO FACTO JUSTIFY THE ACTION OF THE A.O. WE FURTHER FIND THAT THE A.O. HAS MADE A PASSING REMARK IN RESPECT OF PURCHASES MADE FROM UNREGISTERED DEALERS BUT HAS NOWHERE POINTED OUT HO W THE COST OF THE MATERIALS PURCHASED APPEAR TO HIM TO BE INFLATED. T HE A.O. HAS ALSO FAILED TO BRING ON COMPARABLE CASES TO JUSTIFY HIS METHOD OF ESTIMATION OF PROFIT. IN OUR CONSIDERED OPINION, THE APPROACH OF THE ASSE SSEE OFFICER IS NOT ONLY ERRONEOUS BUT ALSO AGAINST THE FACTS OF THE CASE, K EEPING IN MIND THE NATURE OF BUSINESS OF THE ASSESSEE. WE, THEREFORE, HAVE NO HESITATION TO SAY THAT THERE IS NO ERROR OR INFIRMITY IN THE FINDINGS OF T HE LD. CIT(A). APPEAL FILED BY THE REVENUE IS DISMISSED. 12. SINCE THE LUMP-SUM ADDITION CONFIRMED BY THE LD. CI T(A) WOULD MEET THE ENDS OF JUSTICE, WE DO NOT FIND ANY MERIT IN THE CR OSS OBJECTIONS OF THE ASSESSEE. ACCORDINGLY, CROSS OBJECTIONS ARE ALSO DI SMISSED. ORDER PRONOUNCED IN OPEN COURT ON 24 - 11- 20 16. SD/- SD/- (S. S. GODARA) TRUE COPY (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED: /11/2016 RAJESH COPY OF THE ORDER FORWARDED TO: -