The DCIT, Circle-1, JUNAGADH V. M/s. Amber Builders, JUNAGADH

ITA 42/RJT/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89152 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 15-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Business income; Depreciation; Rule of consistency; Source of fund; Royalty expenses; Revenue expenditure
• Section: 37(1); 68; 145; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI N. S. SAINI, ACCOUNTANT MEMBER. ITA. NO. 36/RJT/2013 (ASSESSMENT YEAR:2009-10) M/S. AMBAR BUILDERS STATION PLOT, NR. RAILWAY STATION, OPP. ROKADIYA HANUMAN, JUNAGADH APPELL ANT VS. THE JOINT COMMISSIONER OF INCOME TAX, JUNAGADH RANGE-1, JUNAGADH RESPONDENT & ITA. NO. 42/RJT/13 (ASSESSMENT YEAR:2009-10) THE D.C.I.T., CIRCLE-1, JUNAGADH APPELLANT VS. M/S. AMBAR BUILDERS STATION PLOT, NR. RAILWAY STATION, OPP. ROKADIYA HANUMAN, JUNAGADH RESPONDEN T & ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 2 ITA. NOS. 221/RJT/2014 (ASSESSMENT YEAR: 2010-11) M/S. AMBAR BUILDERS STATION PLOT, NR. RAILWAY STATION, OPP. ROKADIYA HANUMAN, JUNAGADH APPELL ANT VS. THE JOINT COMMISSIONER OF INCOME TAX, JUNAGADH RANGE-1, JUNAGADH RESPONDENT & ITA. NO. 323/RJT/2014 (ASSESSMENT YEAR: 2010-11) ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, RAJKOT APPELLANT VS. M/S. AMBAR BUILDERS STATION PLOT, NR. RAILWAY STATION, OPP. ROKADIYA HANUMAN, JUNAGADH RESPONDEN T PAN: AADFA5055G / BY ASSESSEE : SHRI R. D. LALCHANDANI, ADVOCATE / BY REVENUE : SHRI AVINASH KUMAR, D.R. /DATE OF HEARING :18.03.2015 /DATE OF PRONOUNCEMENT : 27.03.2015 ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 3 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THESE TWO SETS OF CROSS APPEALS FILED BY SAME ASSES SEE ARE ARISING OUT FORM THE ORDERS OF CIT (A)-IV, RAJKOT, DATED 30.11.2012 FOR A.Y. 2009-10 & 06.03.2014 FOR A.Y. 2 010-11. SO, THEY ARE BEING DISPOSED OF BY WAY OF THIS COMMO N ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO. 36/RJT/2013 FOR A.Y. 2009-10, ASSESSE E HAS FILED THE APPEAL ON THE FOLLOWING GROUND: [1] THE COMMISSIONER OF INCOME TAX [APPEALS] ERRED IN CONFIRMING AN ADDITION OF RS.500000/- ON ACCOUNT OF ESTIMATION OF PROFIT. THE CONFIRMATION IS NOT JUST IFIED. 2.1 IN ITA NO. 42/RJT/2013 FOR A.Y. 2009-10, REVENU E HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS: 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN HOLDING THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE REJECTED THROUGH THE ASSESSEE WAS NOT MAINTAINING STOCK REGISTER, WORK IN PROGRESS REGIST ER, MEASUREMENT BOOKS AND QUANTITATIVE DETAILS OF MATERIALS CONSUMED. 2. THE LD.CIT(A) ERRED IN LAW AND ON FACTS OF THE C ASE IN HOLDING THAT THE PROVISION OF SEC.145(3) ARE NOT APPLICABLE TO THE FACT OF THE CASE. 3. THE LD.CIT(A) ERRED IN LAW AND ON FACTS OF THE C ASE IN HOLDING THAT THE PROFITS @ 8% COULD NOT BE ESTIMATE D ON THE SELF CONTRACTED CONTRACT WORK DONE BY THE ASSESSEE. ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 4 4. THE LD.CIT(A) ERRED IN LAW AND ON FACTS OF THE C ASE IN DELETING IN ADDITION MADE ON ACCOUNT OF RS.17,26,890/- BEING TDS CLAIMED BY HIM ON SUBCONTRACTED AMOUNT. 3. ASSESSING OFFICER REJECTED BOOKS OF ACCOUNT B Y INVOKING PRO V ISIONS O F SECT I ON 145 ( 3 ) OF THE ACT , AND THEREB Y ESTIMATING INCOME AT RS . 3,51,17,246 / - AS AGAINST RS . L, 0 4,85,15 4/ - . ASSESSING OFFICER HAS STATED I N THE ASSESSMENT ORDER THAT ASSESSEE HAS NOT MAINTAINED QUANTITATIVE DETAILS FO R MATER I A L, STOCK REGISTER , LABOUR/WORKER ATTENDANCE REG I STER , AND LOG BOOK FOR VEHICLES (CARS) . ASSESSEE HAS DONE WORK AS SUB-CONTRACTOR OF M/S . AMBER CONSTRUCT I ON CO . AND IT HAS ALSO F URTHER SUB- CONTRACTED ITS OWN CONTRACT WORK TO OTHERS BUT SEPA RATE BOOK ACCOUNTS FOR THESE THREE T Y PES OF CONTRACT ACTIVITY WERE NOT MAINTAINED . ASSESSING OFFICER STATED THAT IN TRADING BUSINESS , PURCHASES AND SALES WERE OF SAME AMOUNT AND NO PROF IT WAS DECLARED. IN SUBLET CONTRACT BUSINESS , SUBLET CONTRACT SERVICE CHARGE OF ONL Y 1 % WAS DE C LARED , THOUGH AS PER AGREEMENT W ITH SUB-CONTRACTORS , A FURTHER AMOUNT EQUAL TO TDS WAS A LSO ASSESSEES PROFIT IN SUCH SUBLET WORK . ASSESSING OFFICER STATED THAT ASSESSEE HA S ITS OWN PLANT FOR PRODUCING RAW MATERIAL (CRUSHED METAL) FOR ROAD CONSTRUCTION . A S S E SSING OF F ICER STATED THAT HEAV Y E X PENSES WERE CLAIMED B Y ASSESSEE ON ACCOUNT PLANT S ITE LABOUR E X PENSES , PLANT STAFF SALAR Y EX P E N SE S, E L EC TRI C IT Y EX P E N SES ETC . IN A DD IT IO N TO ITS OWN P RO DU CTIO N . ASSESS IN G O F FICER S T ATED THA T FURTH E R PURCHASES OF CRUSHED MET A L WAS C LA I M E D AT RS . 1,17,32, 2 7 0 / - , H OW E V ER , ASSESSEE HA S N O T F URN I SHED SEPARATE IN CO ME AND E X PENDITURE AC C OUNT F ROM ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 5 T H IS SEPARA TE BUS I NE S S ACTI V IT Y OF CRUSH I NG . ASSESSING O FFI CER STATED THAT V ERIF I CATION O F E X PEN S ES RELATING TO SUCH RAW MATERI AL WAS NOT POSSIBLE F ROM THE DETAILS FILED B Y ASSESSEE OR TH E ACCOUNTS PRODUCED B Y ASSESSEE . ASSESSING OF FI CER STATED THAT ASSESSEE DOES NO T MAINTAIN LOGBOOK FOR V EHICLES. ASSESSING O F F I CER STATED THAT BESIDES E X ISTING CARS ASSESSEE PURCHASED NEW CARS DURING THE Y EAR . HE STATED THAT DEPRECIA T ION OF RS . (1 1,22,047/- + 7,20,295 / -) WAS CLAIMED ON THESE VEHICLES BESIDES OTHER EXPENSES . ASSESSING OFFICER STATED THAT THE CLAIM OF ASSESSEE THAT THESE VEHICLES ARE EXCLUSIVEL Y USED FOR BUSINESS PURPOSE COULD NOT BE VERIFIED IN THE ABSENCE OF LOG BOOK AND IN THE CIRCUMSTANCES OF THE CASE, U SE OF SUCH VEHICLES FOR PERSONAL PURPOSES COULD NOT BE RULED O UT . ASSESSING OFFICER FURTHER OBSERVED THAT ASSESSEE HA S UNDER INVOICED ITS SALES OF ASPHALT BECAUSE DURING THE MO NTH OF NOV . 2008 , PURCHASES ARE ACCOUNTED AT A RATE OF RS . 39/KG AND SALES AT A RATE OF RS . 28/KG . HE STATED THAT UNDER SUCH CIRCUMSTANCES , IT CANNOT BE SAID THAT ASSESSEE WAS CORRECTL Y ACCOUNTING THE PURCHASES AND SALE OF THIS ITEM . ASSESSING OFFICER STATED THAT PART OF EXPENDITURE VOUCHERS AR E SUPPORTED B Y INTERNAL VOUCHERS AND PROPER VERIFICATION OF SUCH E XPENSES WAS NOT POSSIBLE. HE STATED THAT ASSESSEE HAS NOT SHOWN ANY CLOSING WORK IN PROGRESS AND CLOSING STOCK OF MATER IAL WAS SHOWN AT RS . 3,61,000 / - . THE CLAIM OF ASSESSEE THAT ALL WORK DONE UPTO 31 - 03-2009 HAS BEEN MEASURED AND SUCH WORK WAS INCLUDED IN ITS GROSS RECEIPT WAS NOT FOUND VERIFIA BLE. IT WAS FOUND HIGHLY IMPROBABLE THAT ALL WORK IN PROGRESS H AS BEEN ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 6 MEASURED AND ACCOUNTED IN GROSS RECEIPT AND THAT NO WORK IN PROGRESS REMAINED AT THE END OF YEAR . THE ASSESSEE HAS LARGE MACHINER Y OF ITS OWN FOR USE IN ROAD CONSTRUCTION WORK AND HEAVY DEPRECIATION IS CLAIMED ON SUCH MACHINER Y BESIDES OTHER EXPENSES . HE STATED THAT ASSESSEE HAS NOT DECLARED ANY RENTAL/HIRE RECEIPTS FROM SUCH MACHINER Y BECAUSE ASSESSEE HAS SUBLET SUBSTANTIAL PART O F CONTRACT WORK AND IN THE CIRCUMSTANCES OF THE CASE, USE OF MACHINER Y B Y SUB - CONTRACTORS CANNOT BE RULED OUT AND USE OF MACHINER Y FOR EXCLUSIVE BUSINESS OF ASSESSEE WAS NOT VERIFIABLE . ASSESSING OFFICER STATED THAT ASSESSEE HAS CLAIMED METAL TEST ING EXPENSES OF RS.47,68,268/- AND DETAILS FILED B Y IT SHOW THAT PART OF THESE E X PENSES WERE WITH REFERENCE TO CONTRACT WORK OF SIST ER CONCERN M/S . AMBER CONSTRUCTION CO . ASSESSING OFFICER STATED THAT IT IS NOT V ERIFIABLE THAT ALL SUCH EXPENSES WERE V ALID CHARGE AGAINST CONTRACT RECEIPT DECLARED B Y ASSESSEE D U RING THE Y EAR . ASSESSING OFFICER HAS ALSO DISPUTED THE DONATIONS. A S SESSING O FF ICER STATED THAT GROSS CONTRACT RECE I PT OF ASSESSEE ARE RS . 52,68,38,069/- (INCLUDING F URTHER SUBLET CON T RACT AMOUNT) AGAINST SUCH RECEIPT EXPENDITURE ON ASPHALT ALONE I S RS .30,39,21,059/- I . E . 57 . 6% OF GROSS RECEIPT . ACCORDING TO ASSESSIN G O F FICER, ASSESSEE E X PLAINED THAT QUANTIT Y OF ASPHALT WAS TO BE AS PER TENDER CONDITION AND ASPHALT WAS B Y E PRODUCT OF PETROLEUM AND COST WAS THEREFORE H I GHER DURING THE Y EAR . ASSESSING OFFICER DID NOT AGREE WI TH THE E X PLANAT I ON OF ASSESSEE . ASSESSING OFFICER FOUND THE NET PRO F IT ABNORM A LL Y LO W . SO, PRO V ISIONS OF SECTION 145(3) OF THE ACT WERE INVOKED . ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 7 ASSESSING OFFICER STATED THAT B Y GENERAL PERCEPTION ALSO 8% I S NORMAL MARGIN OF PROFIT I N THIS LINE OF BUSINESS . ACCORDINGL Y, ASSESS I NG OFFICER ESTIMA T ED NET PROFIT @ 8% OF RECEIPTS IN RESPECT OF SELF E X ECUTED CON T RACT W ORK RECEIPTS , INCLUDING WOR K A W ARDED B Y M/S . AMBER CONSTRUCTION CO . OF RS .44,04,93,608/- (52,68,38,069 8,63,44,461) AT RS.3 , 52 , 39 , 488/- . ASSESSING OFFICER ALLOWED DEDUCTION OF RS.1 0,00, 580 / - ON PA Y MENT MADE B Y ASSESSEE TO MAIN CONTRACTOR AND THEREFORE DETERMINE D NET PROFIT FOR SEL F E X ECU T ED CON T RAC T WORK AT RS.3 , 42 , 38 , 908/- . ASSESSING OFFICER FURTHER ESTIMATED NET PRO F IT @ 3 % I N RESPEC T O F SUBLET CONTRACT WORK RECEIPTS TO OTHERS OF RS . 86,34,44,611- AT RS . 25 , 90 , 333 / - . 3.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) OBSERVED THA T MAIN MATERIAL REQUIRED FOR ROAD BUILDING IN THE BUSINESS OF ASSESSEE IS BITUMEN AND THE CRUSHED METAL . THE CRUSHED METAL IS PRODUCED FROM QUARRIES AND ALSO PURCHASED W HENE V ER CIRCUMSTANCE SO REQUIRES . CIT(A) FOUND THAT QUANTIT Y OF BITUMEN USED IN ROAD BUILDING IS SHOWN IN THE BOOKS OF ACCOUNTS AND QUANTITY OF THE CRUSHED METAL IS ALSO INDICATED IN THE BOOKS OF ACCOUNTS . THEREFORE, IT CANNOT BE SAID THAT ASSESSEE IS NO T MAINTAIN I NG QUANTITATIVE DETAILS OF MATERIAL . THERE WAS NO FINDING THAT ASSESSEE HAS NOT MAINTAINED VOUCHERS FOR PA Y MENT OF LABOUR. NON-MAINTENANCE OF LOGBOOK FOR USE OF CARS IN THE BUSINESS OF ASSESSEE MA Y ONL Y RESULT IN ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 8 GUESSING THAT THE CARS COULD BE USED FOR PERSONAL P URPOSE . HOWEVER , THERE WAS NO SUCH FINDING THAT THE EXPENDITURE OF FUEL ETC ON CARS IS NOT SUPPORTED B Y VOUCHERS . ASSESSEE HAS E X PLAINED THE USE OF CAR IN BUSINESS IN SUPER V ISION . IN THIS BACKGROUND, CIT(A) OBSERVED THAT SUCH INSIGNIFICANT REASON OF NON MA I NTENANCE OF LOG BOOK FOR CARS COULD NOT BE A REASON TO REJECT THE BOOKS OF ACCOUNT . ASSESSEE HAS RECEIVED INCOME B Y TAKING SUB-CONTRACT FROM CONTRACTOR , B Y TAKING CONTRACTS AND ASSIGNING THEM TO SUB-CONTRACTORS OR BY CHARGING TH EM 1 % OF BILLS RECEIVED AND BY COMMISSION ON SALES OF BITUME N. ASSESSEE HAS MAINTAINED ACCOUNTS FOR EACH TYPE OF A CTIVITIES IN THE BOOKS OF ACCOUNTS AND REFLECTED IN FINANCIAL AC COUNT AND THEREFORE NOT MAINTAINING SEPARATE FINANCIAL ACCOUN TS FOR EACH ACTIVIT Y CANNOT BE A DEFECT IN THE BOOKS OF ACCOUNT . MOREO V ER , ASSESSEE HAD SUBMITTED THE SEPARATE GROSS PROFITS B Y SEPARATING OUT CORRESPONDING RECEIPTS AND EXPENDITU RE AS UNDER BEFORE THE ASSESSING OFFICER. PARTICULARS CONTRACT BUSINESS SUB- CONTRACT BUSINESS TRADING BUSINESS TOTAL CONTRACT WORK RECEIPT SUB CONTRACT SERVICE ASPHALT SALES COMMISSION IOCL CLOSING STOCK 440493608 0 0 6363333 361000 86344461 863444 0 0 0 0 34033282 526838069 863444 34033282 6363333 LESS: 568098128 OPEN I NG STOCK MATERIAL PURCHASE OPERATING EXPENSES/ SUBCONTRACT 22040 299132901 96159229 86344461 34033282 0 0 22040 333166183 182503690 GP 51903771 863444 0 52406215 THE SALES OF ASPHALT OR BITUMEN WAS AT SAME P RICE A T WHICH ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 9 THIS IS OBTAINED FROM IOC , HPCL BECAUSE SALES ARE ONLY TO THE PERSONS WHO CARRIED OUT THE SUB-CONTRACT WORK ON ASSESSEE ' S BEHALF AND THEREFORE BOOKS OF ACCOUNT CANNOT BE REJECTED FOR NOT DERIVING PRO FI T FROM SUCH SALES . THE SALE OF ASPHALT OF RS.3,40,33,282/- WAS SAME AS PURCHASES OF RS.3,40,33,282/- AND THEREFORE QUESTION OF UNDER IN V OICING ALSO DOES NOT ARISE . ASSESSEE HAS CHARGED 1% AS SERVICE CHARGE FROM THE PERSON WHO CARRIED OUT THE WORK ASS IGNED B Y ASSESSEE TO THEM AND SERVICE CHARGES ARE AS PER TER M OF AGREEMENT AND THEREFORE BOOKS OF ACCOUNTS CANNOT BE REJECTED ONL Y ON SUCH GROUND THAT ASSESSING OFFICER FELT THAT SERVICE CHARGES SHOULD HA V E BEEN MORE . ASSESSEE HAS ITS OWN CRUSHED METAL PRODUCING CAPACI TY AND I T ALSO PURCHASES CRUSHED ME T AL W HENE V ER THE CRUSHED METAL PRODUCED BY O W N PLANT WA S NOT S UFFI C I EN T OR T HE TRANSPORTAT I ON OF THE CRUSHED METAL FROM ASSESSEE ' S PLANT TO THE SITE OF T HE W ORK W AS MORE C O S T L Y . THIS WAS A NORMAL BUSINESS DECISION , W HICH CANNOT BE A GROUND TO RE J ECT BOOKS OF ACCOUNTS . THERE WAS NO SUCH FINDING THAT EXPENSES OF THE PLANT SUCH AS STAFF SALAR Y , ELECTRICIT Y BILLS , LABOUR ETC WERE NOT PROPERL Y VOUCHED OR WERE BOGUS TO REJECT THE BOOKS OF ACCOUNTS . THERE ARE CERTAIN EXPENSES SUCH AS TRA VEL LING ETC FOR WHICH ONL Y INTERNAL VOUCHERS CAN BE PREPARED AND THIS IS NOT SOMETHING UNUSUAL I N THE LINE OF BUSINESS OF ASSESSEE . THEREFORE , W ITHOUT FINDING OUT THE NATURE OF E X PENSE AND THE QUANTUM OF E X PENSES FOR SPEC I FIC V OUCHERS , THE BOOKS CANNOT BE REJECTED ONL Y ON SUCH GROUND THAT SOME OF THE V OUCHERS ARE INTERNAL V OUCHERS . ASSESSEE HAS USED ITS ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 10 MACHINER Y ONL Y F OR I T S O W N USE AND IT WAS NOT GI V EN EITHER FOR RENT OR HIRE TO AN Y PERSON INCLUDING SUB-CONTRACTED . TH I S WAS A BUSINESS DECISION AND ASSESSIN G OFFICER CANNOT SIT ON THE CHAIR OF A BUSINESSPERSON. THE METAL TESTING IS DONE B Y THE GOVERNMENT AGENC Y AND TESTING CHARGES ARE BORNE B Y ASSESSEE . BILLS PREPARED BY ROAD AND BUILDING DEPARTMENT SHOW THE METAL TESTING CHARGES. THEREFORE , SUCH EX PENSES CANNOT BE HELD TO BE EXCESSIVE WITHOUT ANY BASIS AND ONLY ON SUSPICION AND FOR THIS REASON, BOOKS OF ACCOUNTS CANNOT BE RE JECTED OBSERVED BY CIT(A) . THE CLAIM OF DONATION OF RS . 1 , 02 , 000 / - IN FINANCIAL ACCOUNTS MIGHT BE INCORRECT CLAIM UNDER SECTION 37(1) OF THE INCOME TAX ACT . HOWEVER , E X PENDITURE WAS NOT BOGUS AND THEREFORE HAS BEEN CORRECTLY SHOWN IN THE BOOKS OF ACCOUNT AND BOOKS OF ACCOUNTS CANNOT BE REJECTED ON THIS GROUND. THE ESTIMATION OF RS.1,02,000/- ON ACCOUNT OF CLAIM OF DONATION WAS SUSTAINED BY CIT(A) . CIT(A) FURTHER OBSERVED THAT ASSESSING OFFICER HAS ENUMERATED VARIOUS GROUN DS , WHICH DO NOT AMOUNT TO DEFECT IN THE BOOKS OF ACCOUNT . MAIN OBJECTION OF ASSESSING OFFICER TO REJECT BOOKS OF ACCOUNT WAS NON-VALUATION OF WORK-IN-PROGRESS. THOUGH MOST OF T HE TIME THE ENGINEERS OF THE RNB DIVISION OF THE GOVER NMENT MEASURE THE WORK UP TO THE MONTH OF MARCH. ASSESSE E HAS ADMITTED THAT IN SOME OF THE CASES WHERE THE MEASUR EMENT HAS NOT BEEN MADE IN THE MONTH OF MARCH , THE RECEIPT IS ACCOUNTED WHEN THEY WERE ACTUALLY RECEIVED . THIS CLEARLY SHOWS THAT THE WORK-IN PROGRESS, WHICH SHOULD HAVE BEEN ACCOUNTED FOR IN PRESENT YEAR , GOT TAXED IN SUBSEQUENT YEAR ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 11 ONLY. THERE WAS A POSSIBILITY THAT ASSESSEE COULD HAVE SHOWN REVENUE INCOME OF AN Y PROJECT IN THE YEAR UNDER APPEAL WHOSE WORK WAS SUBSTANTIALLY COMPLETED IN EARLIER YEAR. THEREFORE THE PROFIT RETURNED IN THE YEAR UNDER APPEAL MIGHT BE MORE THAN WHAT THE CORRECT ACCOUNTING COULD HAVE Y IELDED . HOWEVER , IN EITHER CASE, THE METHOD OF ACCOUNTING APPLIED BY ASSESSEE BY NOT INCLUDING THE WORK IN PROGRESS WAS CERTAINLY DEFECTIVE AND AGAINST THE PRESCRIBED ACCOUNTING STANDARDS . IN MATCHING PRINCIPLE OF ACCOUNTING, THE REVENUE REALIZED IS MA TCHED WITH EXPENDITURE INCURRED . FURTHER , THE EXPENDITURE FOR WHICH REVENUE IS TO BE REALIZED LATER , IS CAPITALIZED AS WORK IN PROGRESS. SUCH WORK IN PROGRESS BECOMES OPENING WORK IN PROGRESS IN NEXT YEAR WHICH IS CLAIMED AS DEDUCTION AGAINST REVENUE REALIZED IN NEXT YEAR . THE RECOG N ITION OF REVENUE MAY BE DELA Y ED DUE TO VERIFICATION OF WORK BY THE GOVERNMENT . HOWEVER , EXPENDITURE IS SUPPOSED TO BE BOOKED AS AND WHEN IT WAS INCURRED AND REFLECTED AS WORK-I N-PROGRESS TILL THE CORRESPONDING REVENUE IS REALIZED FROM THE GOVERNMENT. THE FLUCTUATION IN GROSS PROFIT IS VERY LIKELY DUE TO SUCH INCONSISTENT METHOD OF ACCOUNTING. HOWEVER, DEFECT IN EVALUATING THE WORK IN PROGRESS WOULD BE CONCERNED WITH THE ESTIMATION OF GROSS PROFIT. AT THIS STAGE, FOR TH E PURPOSE OF ESTIMATION, THE MOST RELIABLE SOURCE IS GROSS PROFI T IN BUSINESS OF ASSESSEE IN PRECEDING YEARS. GROSS PROFIT OF TH E BUSINESS OF ASSESSEE FOR ASSESSMENT YEAR 2007-08 AND 2008-09 WA S 8.57% AND 9.76% OBSERVED BY CIT(A). AS PER AUDITED BOOKS OF ACCOUNT , GROSS PROFIT OF ASSESSMENT YEAR UNDER APPEAL IS ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 12 9 . 22 % C O N S IDERING THE GROSS PROFIT OF RS . 5 , 24 , 06 , 215/- OF SELF EXECUTED WORK , SUBCONTRACT WORK AND TRADING OF MATERIAL TOGETHER ON GROSS BUSINESS RECEIPT OF RS.56 , 80 , 98 , 128/- . THEREFORE , CONSIDERING GROSS PROFIT OF EARLIER ASSESSMENT YEARS AND THE FACT THAT ASSESSEE HAD ACCEPTED ADDITION OF RS.5 , 00 , 000/- IN ASSESSMENT YEAR 2008-0 9 IN RESPECT OF SIMILAR BUSINESS TURNOVER AND METHOD OF ACCOUNTING , SIMILAR ESTIMATION OF RS.5 , 00 , 000/ - IN RESPECT OF GROSS PROFIT SHOULD MEET THE JUSTICE OBSERVED BY CIT(A) . ACCORDINGLY, HE DIRECTED ASSESSING OFFICER TO REDUCE THE ADDITION MADE ON AC COUNT OF ESTIMATION OF INCOME AND REDUCE THE TOTAL INCOME OF THE ASSESSEE ACCORDINGL Y . IN NUT SHELL, GROSS PROFIT ADDITION TO THE E X TENT OF RS.5 , 00 , 000/ - WA S SUSTAINED AND DISALLOWANCE OF RS.1 , 02 , 000 / - ON ACCOUNT OF CLAIM OF DEDUCTION OF DONATION WAS SEPARATEL Y SUSTAINED BECAUSE THIS PAYMENT DOES NOT FORM PART OF GROSS PROFIT AND COULD NOT BE CLAIMED FOR D EDUCTION AS PER LAW. 3.2 BEFORE US, LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF ASSESSING OFFICER. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORD ER OF CIT(A) AS FAR AS RELIEF IS GRANTED BUT OPPOSED THE SUSTAINING OF ADDITION TO THE EXTENT OF RS. 5 LACS AS DISCUSSED A BOVE. 3.3 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD, WE ARE NOT INCLINED TO INTERFERE IN THE FIN DING OF CIT(A) WHO HAS RIGHTLY HELD THAT BOOKS OF ACCOUNT OF ASSES SEE WERE ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 13 REJECTED FOR THE REASONS AS DISCUSSED ABOVE AND HE WAS JUSTIFIED IN SUSTAINING GROSS PROFIT TO THE EXTENT OF RS. 5 LACS AND DISALLOWANCE OF RS.1,02,000/- ON ACCOUNT OF CLA IM OF DONATION. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. T HIS TAKE CARE OF REVENUES AS WELL AS ASSESSEES APPEAL ON T HIS POINT. 4. NEXT ISSUE IS WITH REGARDS TO CLAIM OF DISALLOWA NCE ON ACCOUNT OF DEPRECIATION. WE FIND THAT ASSESSING OF FICER MADE ADDITION OF RS.24,19,451/- ON ACCOUNT OF DISALLOWAN CE OF DEPRECIATION ON NEW DUMPERS AND RS . 3 , 63 , 632/- DISALLOWANCE OUT OF VEHICLE EXPENSES. ASSESSING OFFICER HAS STA TED IN THE ASSESSMENT ORDER THAT ASSESSEE HAS CLAIMED DEPRECIA TION OF RS . 1,23,93,647/- , OUT OF W HICH , DEPRECIATION OF RS.28,46,412/- @ 50% OF RS . 56,92,823/- WAS CLAIMED ON NEW DUMPERS PURCHASED DURING THE Y EAR . ASSESSING OFFICER STATED THAT ASSESSEE FURNISHED COP Y OF PURCHASE IN V OICES FOR 5 DUMPERS AT RS.11,38,564/- EACH , WHICH SHOWED THE DATE OF PURCHASE AS 29.09.2008. ASSESSING OFFICER STATED T HAT AN Y OTHER E V IDENCE TO PROVE THAT THESE DUMPERS WERE PUT TO USE ON OR BEFORE 30.09.2008 WAS NOT FILED . ASSESSING OFFICER NOTICED THAT THESE V EHICLES WERE REGISTERED ON 17.10.2008 , AND THEREFORE , H E OBSERVED THAT THE FACT CONCLUSIVEL Y ESTABLISH THAT ASSETS WERE NOT PUT TO USE BEFORE 17.10.2008 . A S S E SS ING O FF ICER STATED THAT ASSESSEE HAD C LAIMED DEPRECIATION @50 % AS A G AINST APPLICABLE RATE OF 15 % . ASSESSING OFFICER OBSE RV ED THAT 50 % DEPRECIATION IS A V AILABLE ONL Y IF NEW COMMERCIAL ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 14 V EHICLE I F IT IS ACQUIRED ON OR A F TER 01.01.20 09 BUT BEFORE 01.1 0. 200 9 . ASSESS I NG O FF ICER OBSERVED THAT SINCE ASSESSEE HAS PURCHASED THESE V EHICLES B Y PURCHASE IN V OICES DATED 29.09.2008 , THESE ASSETS ARE NOT EL I GIBLE FOR 50% RATE OF DEPRECIATION . ASSESSING O FF ICER HELD THAT THE ADMISSIBLE RATE OF DEPRECIAT I ON IS 15% AND SINCE THESE ASSETS WERE PUT TO USE A F TER 30.09.2008 , DEPRECIATION @7 . 5% ONL Y IS ADMISSIBLE . ACCORDINGL Y , ASSESSING OFFICER ALLOWED DEPRECIATION AT RS . 4 , 26 , 961/- ONLY AND DISALLOWED EXCESS CLA I M FOR RS . 24 , 19 , 451/- . FURTHER, ASSESSING OFFICER STATED IN ASSESSMENT ORDER THAT ASSESSEE HAS CLAIMED TOTAL EX PENSES OF RS . 24 , 24 , 215/ - ON OLD AND NEW CARS . ASSESSEE E X PLAINED THAT VEHICLES WERE USED AT VARIOUS SITES AN D AT PLANT . ASSESSING OFFICER OBSER V ED THAT LOG BOOK FOR THESE V EHICLES WERE NOT MAINTAINED , AND USE OF VEHICLES FOR PERSONAL PURPOSES CANNOT BE RULED OUT , AND THEREFORE , ASSESSING OFFICER DISALLOWED 15% OF THESE EXPENSES FOR PERSONAL USE AND MADE ADDITION OF RS.3 , 63 , 632/-. 4.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F ASSESSEE AND HAVING CONSIDERED THE SAME CIT(A) OBSERVED THAT NEW DUMPERS WERE PURCHASED ON 29.09.2008 AND THE HIGHER RATE OF 50 % DEPRECIATION WAS APPLICABLE FOR THE DUMPERS , WHICH WERE PURCHASED AFTER 01.01.2009 BUT BEFORE 1-10-200 9 . ASSESSEE HAS NOT PUT ANYTHING ON RECORD AS HOW THE DUMPERS COULD BE USED FOR BUSINESS PURPOSE BEFORE THE REGIS TRATION OF ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 15 SUCH VEHICLES ON 17.10.2008 . IN VIEW OF THIS, CIT(A) RIGHTLY CONFIRMED THE DISALLOWANCE OF RS.24 , 24 , 215/- MADE B Y ASSESSING OFFICER ON ACCOUNT OF CLAIM OF DEPRECIATI ON BY ASSESSEE ON NEW DUMPERS. THIS REASONED FINDING OF C IT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 5. NEXT ISSUE RAISED BY WAY OF GROUND NO.4 IN REVEN UES APPEAL IS WITH REGARDS TO ADDITION MADE ON ACCOUNT OF RS.17,26,890/- BEING TDS CLAIMED BY ASSESSEE ON SUBCONTRACTED AMOUNT. IT WAS AGREED BY BOTH THE PA RTIES BEFORE US THAT IT IS NOT EMERGING FROM THE ORDER OF CIT(A), SO SAME IS DISMISSED BEING MISCONCEIVED. AS A RESULT, REVENUES AS WELL AS ASSESSEES APPEAL FOR A.Y. 2009-10 IS DI SMISSED. 6. IN ITA NO. 221/RJT/2014 FOR A.Y. 2010-11, ASSESS EE HAS FILED THE APPEAL ON THE FOLLOWING GROUND: [1] THE COMMISSIONER OF INCOME TAX [APPEALS] ERRED IN CONFIRMING AN ADDITION OF RS.1000000/- ON ACCOUNT O F ESTIMATION OF PROFIT. THE CONFIRMATION IS NOT JUST IFIED. 6.1 IN ITA NO. 323/RJT/2014 FOR A.Y. 2010-11, REVEN UE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE CANNOT B E REJECTED THROUGH THE ASSESSEE WAS NOT MAINTAINED STOCK REGISTER, WORK IN PROGRESS REGISTER, MEASUREM ENT BOOKS AND QUANTITATIVE DETAILS OF MATERIALS CONSUME D. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN H OLDING THAT THE PROVISIONS OF SECTION 145 ARE NOT APPLICAB LE TO ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 16 THE FACT OF THE CASE. 3. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN RESTR ICTING THE ADDITION UPTO RS.10 LAKH OUT OF TOTAL ADDITION OF RS. 4,45,29,643/- MADE ON ACCOUNT OF PROFIT FROM OW N CONTRACT WORK. 4. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DELET ING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF PROFIT FROM SUB-CONTRACT OF RS.21,48,129/-. 5. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DELET ING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF COMMISSION EARNED FROM IOCL OF RS.4,35,12,402/-. 6. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DELET ING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED LOANS U/S. 68 OF THE IT ACT OF RS.10,90,000/-. 7. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DELET ING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED OUTSTANDING BALANCES OF SUB-CONTRACTORS U/S. 68 OF THE I.T. ACT OF RS.2,53,30,017/-. 8. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DELET ING THE ADDITION MADE BY THE A.O. 41(1) OF THE IT ACT OF RS.3,51,98,022/-. 7. ASSESSING OFFICER MADE FOLLOWING ADDITIONS IN IT S ASSESSMENT ORDER. SR. NO. NATURE OF ADDITION AMOUNT (RS.) 1 PROFITS FROM SUB-CONTRACTS 21,48,129 2 COMMISSION EARNED FROM IOCL 4,35,12,402 3 PROFIT FROM OWN CONTRACT ESTIMATE AT 10% OF RS.44,52,96,435/- 4,45,29,643 4 ADDITION U/S. 68 AS PER PARAGRAPH-3 OF THE ORDER 10,90,000 5 ADDITION U/S. 68 AS PER PARAGRAPH-4 OF THE ORDER 2,53,30,017 6 ADDITION U/S. 41(1) 3,51,98,022 ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 17 AS SEEN FROM ABOVE TABLE, IMPUGNED ASSESSMENT INVOL VED SIX ADDITIONS. HOWEVER, ASSESSING OFFICER WHILE DETERM INING TOTAL INCOME DID NOT CONSIDER ADDITION MADE AT SR. NO. 4, 5 & 6 OF ABOVE TABLE ON THE GROUND THAT SINCE PROFITS FROM O WN CONTRACT WERE ESTIMATED AT RS.4,45,29,643/-, NO SEPARATE ADD ITIONS WERE REQUIRED TO BE MADE ON THESE THREE COUNTS. AC CORDINGLY, TOTAL INCOME DETERMINED BY ASSESSING OFFICER IN COM PUTATION PART IS AS UNDER: SR. NO. PARTICULARS OF INCOME/DEDUCTION AMOUNT (RS.) 1 PROFITS FROM SUB-CONTRACTS 21,48,129 2 COMMISSION EARNED FROM IOCL 4,35,12,402 3 PROFIT FROM OWN CONTRACT ESTIMATE AT 10% OF RS.44,52,96,435/- 4,45,29,643 4 INCOME FROM OTHER SOURCES 46,51,794 5 DEDUCTION ON ACCOUNT OF REMUNERATION U/S. 40(B) 13,50,000 6 DEDUCTION UNDER CHAPTER-VI A 75,500 7 TOTAL INCOME 9,34,16,468 8 TOTAL INCOME ROUNDED OFF TO 9,34,16,470 7.1 AGGRIEVED BY SAME, ASSESSEE WENT BEFORE FIRST APPEL LATE AUTHORITY CHALLENGING THE SAID ADDITIONS. INITIALL Y, ASSESSEE HAS TAKEN T HR EE GROUNDS IN THE APPEAL MEMORANDUM ORIGINALLY FILED ON 19.04.2013. HOWEVER, SUBSEQUEN T LY, ASSESSEE FILED ADDITIONAL GROUNDS NO. 4, 5 , 6 , 7 AND 8 IN ADDITION TO ABOVE TH R EE G R OUNDS, BY STATING THAT THESE FIVE ADDITIONAL GROUND S WERE LEFT OUT INADVERTENTLY. THUS, CIT(A) ADDRESSE D 8 GROUNDS WHICH ARE AS UNDER: 1 . THE A 0 ERRED IN MAKING AN ADDITION OF RS 1090000 / - UND E R THE PROVISIONS OF S E CTION 68 OF THE ACT ON ACCOUNT OF DEPOSITS R E CEIVED FROM ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 18 1 K M CHAUHAN (HURF) RS. 425000 2 MULUBHA JADEJA RS. 145000 3 RAMBHAI JADEJA RS 195000 4 LAKHIBEN JADEJA RS 100000 5 PUJABEN CHAUHAN RS 225000 2. THE AO E R RED IN MAKING AN ADDITION OF RS 2533001 7 / - UNDER THE PROVISIONS OF SECTION 68 OF THE ACT ON AC COUNT OF OUTSTANDING BALANCES OF SUBCONTRACTORS . THE . A D DITION IS NOT JUSTIFIED. 3. THE AO ERRED IN MAKING AN ADDITION OF RS 35198022 UNDER THE PROVISIONS OF SECTION 41 ( 1) OF THE ACT . THE ADDITION IS NOT JUSTIFIED. 4. THE LEARNED ASSESSING OFFICER ERR E D IN REJECTING TH E RE S ULT AS DIS C LOSED B Y BOOKS OF ACCOUNTS AND ESTIMATING TH E PROFIT U / S . 145 ( 3 ) OF TH E ACT . THE BOOKS ARE REGULARL Y MAINTAINED AND SUPPORTED B Y BILLS AND VOUCH E RS AND DUL Y AUDITED BY CHARTER E D ACCOUNTANT . THE REJECTION OF BOOKS R ES ULT I S UNWARRANT E D AND UNJUSTIFIED . 5. WITHOUT PREJUDICE TO GROUND NO . 4 , ESTIMATE OF NET PROFIT IS 10 % AND ESTIMATE OF INCOME & . 44529643 / - IS TOO HEAV Y ARBITRAR Y AND NOT W ARRANT E D B Y FACT S OF THE CAS E . 6. WITHOUT PREJUDICE TO GROUND NO 4 & 5 , THE AO E RR E D IN MAKING A S E PARATE ADDITION OF RS 2148129 / - ON ACCOUNT OF PROFIT FROM SUB CONTRA C TS . THE SAM E IS AN INT E GRAL PART OF THE BUSINESS AND IS COVER E D B Y THE PROFIT AS SHO W N B Y THE APP E LLANT . 7. WITHOUT PREJUDICE TO GROUND NO 4 & 5 , THE AO ERR E D IN MAKING A S E PARATE ADDITION OF RS 43512402 / - ON ACCOUNT OF PROFIT FROM COMMI SS ION F R OM IOCL . TH E SAM E IS A N INTEGRAL PART OF THE BUSIN E SS AND IS C O V ERED B Y THE PROFIT A S S HOWN B Y TH E APP E LLANT. 8. WITHOUT PREJUDICE TO GROUND NO 4 & 5 , THE A 0 E RR E D IN MAKING A S E PARAT E ADDITION OF RS 4651 7 94 / - ON ACCOUNT OF IN C OME FROM OTH E R S O UR CE S . TH E SAME IS AN INT E GR A L PART OF TH E BU S INESS AND IS C OVER E D B Y THE PROFIT AS S H O WN B Y THE APPELLANT . ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 19 7.2 ASSESSEE, IN APPEAL, FILED THE WRITTEN SUBMISSIONS ON ALL GROUNDS AND HAVING CONSIDERED THE SAME, CIT(A) OBSE RVED THAT ASSESSEE HAS SHOWN OPERATING PROFIT OF RS. 2,96,34 ,605/- ON TOTAL RECEIPTS FROM CONTRACTS (OPERATING INCOME) AT RS. 74,60,42,986/-, WHICH WAS ABOUT 3.96%. THE OTHER INCOME EARNED AT RS. 46,51,794/- SHOWN BY ASSESSEE SEPARAT ELY IN THE PROFIT AND LOSS ACCOUNT FOR F. Y.E. 31/03/2010 WAS NOT TAKEN INTO CONSIDERATION, WHILE WORKING OUT THE OPERATING RATIO OF 3.96%. ASSESSEE HAS EXPLAINED THAT THE TOTAL RECE IPTS OF RS . 74,60,42,986/- ALSO INCLUDE THE VALUE OF WORKS SUB- CONTRACTED AT RS. 21 , 48,12,720/-, MEANING THEREBY, THE WORKS CARRIED OUT , INDEPENDENTLY BY ASSESSEE CAME TO RS. 53,12,30,266/ -. ASSESSEE DERIVED THE NET PROFIT ON THE WORKS CARRIE D OUT INDEPENDENTLY (2,96,34,605 / 53,12,30,266) COMES TO 5.60%. IN THIS BACKGROUND, GROUNDS RAISED BY ASSESSEE WERE ADJUDICATED BY CIT(A) ONE BY ONE AS UNDER: 7.3 CIT(A) FIRST TOOK UP THE ISSUE OF REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF PROFITS U/S.145(3). THE SE TWO GROUNDS ARE INTERCONNECTED, THEREFORE BEING ADJUDIC ATED TOGETHER. IN FACT ASSESSING OFFICER ESTIMATED PRO FIT FROM EXECUTION OF OWN WORKS AT 10% OF CONTRACT RECEIPTS OF RS.4,45,29,643/- AMOUNTING TO RS.4,45,29,643/- AFTE R REJECTION OF BOOKS OF ACCOUNTS U/S. 145(3) OF THE A CT. ASSESSING OFFICER HAS GIVEN THE FOLLOWING OBSERVATI ONS/REASONS FOR DOING THE SAME IN THE ASSESSMENT ORDER AS UNDER : A) HE HAS NOT FILED A SEPARATE TRADING OR CONTRACT ACCOUNT ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 20 FOR WORKING OF HIS GROSS PROFIT EARNED FROM HIS CON TRACT RECEIPTS , BUT HAS MERGED BOTH THE CON T RACT ACCOUNT AS WELL AS THE P&L ACCOUNT INTO ONE SINGLE ACCOUNT. B) THE ASSESSEE HAS FILED OPENING AND CLOSING STOCK INVENTOR Y WHEREIN HE HAS STAT E D THAT THE STOCK IS OF RAW MATERIAL . NO BREAKUP OR WORKING OF THE SAME HAS BEEN GIVEN. FURTHER , IT IS INTERESTING TO NOTE THAT NO OPENING OR C LOSING WORK IN PROGRESS HAS BEEN DE C LARED B Y TH E ASSESS EE. C) IN R ES P EC T OF RAW M A T E RIAL S PUR C H ASED A ND S T OR E S & O T HE R ITE M S CO N S UM ED DURING TH E C ONTR ACT WORK NO S T OC K R EG I S T ER I S M A INT A IN ED W H E R E IN TH E INPUT S AR E RECORD E D. IT NEED S TO BE M E NTI O N E D H E R E THAT TH E ASSESSEE H AS P UR C H ASE D 1 7 ITEMS OF RAW MATERIALS VI Z . A S PHALT , BLA S TIN G M A T E RI A L , CE M E NT , C RU S H E D M E T A L RD , CRUSH E D : M E TAL URD, FLOORIN G TILES, FU E L , GA RD S T O N E, IR O N & S T EE L , O IL & GREECE 12 . 5 %, OIL & GREASE , OIL & GREAS E OGS , PLANT S PAR E, R CC PIP E , ROA D MAKING MATERIAL , TYRE TUB E AND V E HICL E SPAR E COS TING R S . 32 , 45,51 , 305 / - . NO REGISTER IN RESPECT OF THES E PURCH A S E S , THEIR CO N S UMPTION, UTILIZATION AND TH E STOCK AV A ILABLE ON HAND D E TAILS A R E MAINTAIN ED B Y TH E A S S ESSE E . AS ALREADY NOT E D IN R E SP E CT OF ALL THESE IT E M S . ROW S TO C K R EG I S T E R , NO IS S UE R E GIST E R O R CONSUMPTION REGISTER IS MAINTAIN E D B Y TH E AS SE S S E E H E N CE BOTH TH E OP E NING AND CLOSING STOCK DECLAR E D BY TH E AS S ES S E E HAVE B EE N D E C LAR E D TOTALL Y ON THE BASI S OF APPROXIMATION I . E . THESE STOCK CANNOT BE WORK E D OUT . D) NO MEASUREMENT BOOK I S MAINTAIN E D IN R E SP EC T OF TH E WORK DON E B Y HIM AT ' THE VARIOUS SITES . E) NO DAY TO DAY CONSUMPTION A S WELL AS WORK DON E RECORD IS MAINTAINED BY THE ASSESSEE . F) THE ASSESSEE HAS SIX HOT MIX PLANTS AT KESHOD , JETPUR , JAMJODHPUR , NANUDI, KALAVAD AND BAGASARA . AT ALL THES E HOT MIX PLANTS NO RECORDS ARE MAINTAINED I.E. IN OTHER WORDS NO REGISTERS REGARDING CONSUMPT ION , PRODUCTION , DISPATCH AND STOCK ON HAND ARE KEPT BY THE ASSESS EE . G) IN RESPECT OF ALL THE OPERATING EXP E NSES W HICH C O MPRISING OF 36 ACCOUNTS VIZ . BLACK T R AP 'AVATION ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 21 LABOUR CHARGES , PLANT EXP ., PLANT SITE LABOUR CHARGES , PLANT STAFF SALA R Y EXP . , R OAD . RTE LABOUR CHARGES , ROAD TAX & GOODS TAX, ROAD FURNITURE , ASPHALT EXPE N SES , ASPHALT GOODS CARTING , BLASTING EXP . , CEMENT EXP., CRUSHER LAB O UR C H A RG E S , C RUSH E R M ETAL CA R TING EXP . , DIESEL EXPENSES , EARTH WORK C U TTING & FI LLI N G EXP., ELE C TR ICI T Y EXPE N SES , FI R E WOOD EXP . , LA BOUR WEL F A R E (W W ! C . ), LA N D R E N T E XP . , L OAD E R H IRE C H A R GES , LOADI N G U N LOADI N G LABO UR C H A R GES , M ETAL TESTI N G , PLA NT & M AC H INERY REPAIRING EXP. , ROYALTY EXPENSES , ROYALTY PERM IT EXP ., R U BBLE RECOVE R Y , STAFF KITCHEN EXP . , SUB- C ONTRACT C OMMISSION , SUB-CONTRACT WORK , TANKER / DUMPER D R IVER SALARY , TRANSPORTATION EXP ., TYRE TUBE R E PAIRING EXP . , VE H ICLE REPAI R ING EXP . , VEHICLE REPAIRING EXPO(CAR) , WATER EXPENSE AND WORKSHOP STAFF SALA R Y A M O U NTING TO RS. 34 , 83 , 54, 7 99 / - , NO VERIFIABLE DETAILS ARE MA IN TAINED BY T H E ASSESSEE . IN RESPECT OF THESE EXPENSES SELF MAD E VOUCHERS ARE KEPT. ALMOST A LL THESE EXPENSES ARE INCURRED IN CASH . IT NEEDS TO BE MENTIONED HERE THAT THE LABOUR CHARGES TOTAL RS . 1 , 40 , 56 , 250 / - + RS. 3 ,7 4 ,7 98 / - + RS . 35 , 08 , 150 / - + R S. 98 , 53 , 200 / - + RS . 2 , 89,56 , 2001 - + RS . 11 , 55 , 550 / - + RS . 52 , 89 , 700 / - . / R S. 20 , 00 , 500 / - = RS . 6 , 51 , 94 , 348 / - . THE LABOUR CHARGES IN C URR E D BY THE ASSESSEE ARE ALL IN CASH . ALL THE LABOUR CHARG E S IN C URR E D B Y THE A S S E SS E E A R E NOT SUPPORTED BY AN Y BILL S OR VOU C HERS . ONL Y S OM E OF TH E L A BOUR C HARGES ARE VOUCH E D B Y SELF MAD E VOU C H E R S WHICH ARE INCOMPL E TE AND LA C K DETAIL S AND C LARITY. THE ASSESSEE' PRODUCED THRE E BOX FILES W HI C H C ONTAIN E D THE BILLS AND PETT Y CASH VOUCHERS . IT WAS SIGNIFI C ANT TO NOTE THAT ALMOST ALL TH E LABOUR CHARG E S WERE NOT AT ALL SUPPORT E D B Y AN Y BILL S OR V OU C H E R S . TH E P AY M E NTS WE RE IN C A S H AND ONL Y S OME STRAY VOUCHERS IN R E SP E CT OF LABOUR C HARG ES PAID WE R E AVAILABLE IN THE BOX FILES THAT WER E PRODU CE D FO R E XAMINATION / VE RIFI C ATION . H) IN RESP E CT OF TRUCKS AND DUMP E R S USED B Y THE AS SES S EE NO TRIP R EG I S T E R IN R E SP E CT OF THE TRU C KS & DUMPERS HAS BE E N K E PT OR MAINTAIN E D B Y TH E AS SESSE E . I) IN RESPECT OF DIESEL EXP E NS E S TH E CONSUMPTION OF TH E D IE SEL , D E TAIL S ARE NOT MAINTAINED. ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 22 J) THE ASSESSEE HAS FIVE QUARRI E S AND HA S PAID RO Y ALT Y E XP E N SE S OF R S . 22 ,8 3 , 415 / - . NO DETAILS OF THE STON E S E XCA V AT E D / EXTRACTED HA V E B EE N K E PT B Y TH E ASSESS E E AND NO S TOCK OF STON E S METAL L YI N G AT TH E QU A RRI E S HA S B EE N D E C L A R ED B Y TH E A SSES S EE. IN. FAC T , TH E M E TAL EXT R AC T ED I N T H E M O N TH OF MARCH O R A T TH E E N D OF TH E MONTH OUGHT T O HA VE R E M AI N E D AS S T OC K O R A T L EAS T S H OU L D H AVE BEE N SH OW N T O H AVE B EE N C ON S UM E D. TH E A SSESSEE HA S N OT FIL ED A N Y D E T A IL S SO FA R . K) DURING TH E YE AR TH E A S S E S SEE H AS OP E R A T E D A T NUMB E R OF VA RI O U S . SI T E S AS CA N B E SEEN FROM THE NUMBER OF CONTRA C T S E X E C UT E D B Y H I M DUR I N G TH E PRE V IOU S YE AR . NO SITE WIS E D E TAIL S OF E X P E N S E S IN C URR E D AS W E LL A S W O RK D O N E AR E KEPT B Y TH E ASSESSEE . L) TH E A S SESSEE RAISE S THE BILL A S P E R TH E M E A S UR E M E NT D O N E B Y TH E D E PARTM E NT. THIS ONL Y INDICAT E S TH E QUANTUM O F WO RK DON E B Y TH E A SSES S EE, BUT IT DO ES NOT INDICATE THE ACTUAL INPUT OF VARIOU S MAT E RIALS FOR DOING TH E WORK AND TH E AMOUNT OF OTHER EXPENDITUR E INCURRED DURING THE PROC ESS . M) THE BULK OF TH E EXP E NDITUR E IN R E SP EC T O F O W N CONTRA C T WORK IS ALSO DON E THROU G H SUB - CONTRACTORS , THE DETAIL S OF W HICH ARE INCOMPLETE AND SK E TCHY . N) IN RESP E CT OF THE WORK S UB- C ONTRA C T ED B Y THE AS SE S SEE, TH E A SSES S EE DO E S N O T H AVE FACTUAL D E TAIL S OF THE WORK D O N E B Y TH E SUB- C ONTRACTORS. THE AS S ES SE E HAS TO MAINTAIN E D TH E R E C O RD S OF TH E WORK D O N E B Y TH E S UB- C ONTRA C TORS AND AL S O FURNI S H RELEVANT E VIDENCES SO AS T O S UPPORT TH E A CC OUNT I NG E NTRIE S MAD E B Y HIM IN ITS . BOOKS OF AC C OUNTS . O) IT MAY BE P E RTINENT TO MENTIONED H E RE THAT TH E STRUCTUR E OF A ROAD CON S IST OF THE FORMATION OF SUB GRADE AND TH E PAVEMENT . TH E STRUCTURAL E L E M E NT OF TH E PAVEMENT IS THE FOUNDATION ( SOILING OR BOTTOMING ) AL SO CALLED S UB BAS E AND THE BASE. THE BASE MA Y BE SURFACED E ITHER WITH A C ONCRETE OR A BITUMINOUS SURFACING . THUS , IT IS CLEAR THAT THERE ARE FOUR STAGES IN THE EXERCISE OF ROAD MAKING. EACH STAGE IS CLEARLY IDENTIFIABLE . THE ASSESSEE HAS NOT MAINTAINED ' ANY R EC ORD S SO A S TO EVEN CONCLUDE THAT WHICH STAGES OF ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 23 WORK HE H AS DONE DURING T H E YE AR . ALL T HE MAT ERI A L U SED D U RING THE PROCESS HAS TO BE IDENTIFIED AS TO IN WHICH STAGE THE SA M E HAS BEEN U TILIZED OR CONSUMED. IT IS THEREFORE M A N DATO R Y T H AT QUANTITY RECORDS MUST BE MAINTAINED SO AS TO GET A CLEAR PICTURE OF THE C OSTS INCURRED BY THE ASS E S S EE AND W H E TH E R TH EY MAT C H W ITH TH E FINAL OUTCOM E TH E ROADS STRUCTURED BY THEM . P) THE ASSE SS EE HAS EX E CUTED 11 2 C ON T R A CT S OBTAIN E D F RO M V ARIOU S D E PARTMENTS SO FAR. ON GOING THROUGH THE CONTRACTS IT IS SE EN THAT A S AGAINST TH E ESTIMAT E D VALU E OF CONTR AC T S OF RS . 129 . 30 C RORE S TH E AS S E SSE E HAS B EE N AWARD E D TH E S E CONTRACT S A T THE C O NTR AC T VA LUE O F R S. 1 7 0 . 96 C ROR ES . THU S, TH E A SS E SSE E HAS GOT THE C ONTRA C T S AWARD E D AT A HI G H E R V ALU E I. E. AR O UND 33 % M O R E THAN TH E E S TIMATED VALU E OF TH E C O NTRA C T. THU S, I T I S CR Y STAL C L E AR THAT TH E R E I S NO REASON FOR THE ASSESSEE SUFFERING AN Y LO SS E S. IN FACT , IN V IEW OF TH E UPWARD VALU E OF TH E CONTRACTS OBTAINED B Y HIM , TH E A SS E S S E E OUGHT TO HAV E EARN E D A HIGHER PROFIT MARGIN ON E XEC UTION OF TH ESE C O NTRACT S . Q) ALL THE ABOVE CL E ARL Y INDI C ATE THAT TH E BA S IC R EC ORD S AND A C COUNT S MAINTAINED B Y THE ASSESS E E AR E NOT SUPPORTED B Y S UFFI C IENT DETAILS AS R E QUIR E D B Y LAW AND HEN CE TH E R E SULT S DE C LAR E D B Y TH E A SSESSEE C ANNOT BE AC CE PT E D. R) THE A S S ES S E E HAS ALSO S O LD A S P H ALT T O IT S S UB- CO NTRA C T O R S A T ITS OW N C OST PRI CE AND HA S NOT E ARN E D A N Y P ROF IT S FR O M TH ESE SA L ES . FURTH E R IT IS AL SO A DMITT E D TH A T THE CO MMI SS I O N EA RN ED B Y T H E ASSESSEE ON TH E P U R C H ASE OF ASP H A L T HA S ALS O N O T B EE N PA SSE D O NT O TH E S U B - CO N T R ACTORS I . E . TH E E NT IRE CO M M I SSIO N I N CO M E EA RN E D B Y TH E A SSESSEE O N P UR C H ASE OF ASPHA L T H AS B EEN R E T AI N ED B Y H I M . MO R EOVE R , H E H AS D E B I T E D TH E E N T IR E PUR C H ASE P RI CE OF AS PHALT AS H IS PUR C H ASE C O S T A ND H AS C LAIM E D TH E SA M E AS H IS R EVENUE EXPE ND ITU R E . T H US, TH E E N T IR E CO M MISSIO N IN CO M E OF R S . 4 3 5 1 2402 / - EA RN ED BY H IM ON P U R C H ASES O F ASP H ALT W H IC H IS H IS R AW M A T E RIAL AND W H IC H H AS B EEN CO N SU M ED W H I L E EXECU T ING T HE CONTR A CTS IS HIS C L EA R PR OFI T A ND TH E SAME N EEDS TO BE 1 L . J SE P A R ATELY ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 24 TAXED IN T OTO. S) DURING THE YEAR THERE ARE NEW ACCOUNTS OF EXPENS ES VIZ. (I) BLASTING EXPENSES RS. 1,92,080/- (II) CEME NT EXPENSE RS.18,924/- (III) LOADER HIGHER CHARGES EXPENDITURE RS.34,000/- (IV) LOADING & UNLOADING CHARGES RS. 20,00,500/- (V) RUBBLE RECOVERY RS.4,395/- (VI) AUDIT FEES RS.28,000/- (VII) DISCOU NT EXPENDITURE RS.35,690/- (VIII) MEMBERSHIP FEES RS.7,000/-. FOR THIS ASSESSING OFFICER ALSO RELIED ON SAME CASE LAWS AS NARRATED IN PARA 7.1 OF HIS ORDER. 7.4 ASSESSEE HAS REBUTTED OBSERVATION / FINDING OF ASSESSING OFFICER AS DETAILED IN PARA 7.2 OF ORDER OF CIT(A). ASSESSEE HAS ALSO RELIED UPON DECISION OF PREDECESSORS OF FIRST APPELLATE AUTHORITY IN OWN CASE FOR A.Y. 09-10, WHEREIN CIT(A ) HAS GRANTED PARTIAL RELIEF AS DISCUSSED AND DECIDED ABO VE. IN THIS BACKGROUND, CIT(A) IN A.Y. 2010-11 HAS DECIDED AS U NDER: 7.4 I HAVE CONSIDERED CAREFULLY THE SUBMISSIONS MA DE BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCE EDINGS AND IN APPEAL PROCEEDINGS AND SO ALSO THE ASSESSMEN T ORDER PASSED BY THE ASSESSING OFFICER. I HAVE ALSO GONE THROUGH THE ORDER OF MY PREDECESSOR ADJUDICATING THE SIMILA R ISSUE IN THE PREVIOUS ASSESSMENT YEAR 2009-10. IT IS A T RITE LAW IN THE CONTEXT OF REJECTION OF BOOKS, THAT THERE SHOUL D BE GLARING AND SERIOUS DEFECTS IN BOOKS, WHICH SUSPEND S THE PROCESS OF DETERMINATION OF INCOME. THE EMPHASIS H ERE IS ON SERIOUSNESS OF THE DEFECTS. THE COURTS HAVE REP EATEDLY HELD THAT REJECTION OF BOOKS IS A VERY EXCEPTIONAL EXERCISE AND HENCE IT CANNOT BE RESORTED TO IN A LIGHT HEART ED MANNER. THE ASSESSING OFFICE CLEARLY APPEARS TO HA VE MISSED THIS ASPECT AS NONE OF HIS CONTENTIONS AS DI SCUSSED SUPRA CAN BE CHARACTERIZED AS SERIOUS OR GLARING DE FECTS. THE CONTENTIONS OF THE ASSESSING OFFICER MERELY APP EARS TO BE OF 'FIRST DEGREE DOUBTS' WHICH COULD BE, AT THE BEST, DESCRIBED AS STARTING POINT FOR FURTHER PROBE WHICH HE ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 25 SHOULD TAKE TO THE NEXT LEVEL AND TO THE LOGICAL EN D. UNFORTUNATELY, THE ASSESSING OFFICER HAS MISERABLY FAILED IN DOING SO. HIS CONTENTIONS ARE PRELIMINARY IN NATURE AND HAVE NOT BEEN TRANSLATED INTO ANY REAL ADVERSE FIND INGS AGAINST THE APPELLANT ON THE BASIS OF WHICH OUTRIGH T REJECTION OF BOOKS ' CAN B~ JUSTIFIED. AT WORST, THESE CONTENTIONS CAN BE DESCRIBED AS IRREGULARITY ON THE PART OF THE APPELLANT BUT UNDER NO CIRCUMSTANCES, IT CAN BE TERMED AS SERIOUS OR GLARING DEFECTS WHICH SUSPEND DETERMI NATION OF INCOME FROM THE BOOKS. IT IS WORTHWHILE TO CONSI DER THAT THERE IS NO ADVERSE FINDING REGARDING PURCHASE, EXP ENSES, STOCK OR RECEIPTS. UNDER THE CIRCUMSTANCES, THE REJ ECTION OF BOOKS IS UNSUSTAINABLE IN VIEW OF VARIOUS JUDGMENTS RELIED UPON BY THE APPELLANT AND PARTICULARLY IN THE VIEW OF GUJARAT HE JUDGMENT IN CASE OF VIKRAM PLASTICS (239 ITR 161) AND RAJKOT ITAT DECISION IN CASE OF GIRISH M. MEHTA (99 TTJ 394) WHICH CONSTITUTE BINDING PRECEDENT FOR THE UNDERSIGNED. IN FACT, THE BOOK RESULT OF THE APPELL ANT , WHEN EXAMINED , IT IS NOTICED THAT THE GROSS PROFIT AND NET PROFIT MARGINS HAVE INCREASED FROM TH E PR E CEDING PREVIOUS YEARS. THIS VIEW IS WELL SUPPORTED BY THE RAJKOT ITAT DECI SION IN CASE OF I. K. IMPEX (ITA NO. 1125IRJT/2010) WHEREIN THE HON'BLE ITAT CONFIRMED THE DECISION OF THIS OFFICE ON THE SAME SUBJECT . ON THE OTHER SIDE, THE STAND OF THE APPELLANT IS FOUND TO BE QUITE REASONABLE, AS NOT ONLY HIGHER AMOUNT OF PROFIT IS REPORTED AND OFFERED FOR TAXATION, BUT ALSO AVAILABILITY FOR VERIFICATION WAS SHOWN IN RESPECT OF CONTENTIONS OF ' THE ASSESSING OFFICER CONSIDERING ALL THESE FACTORS I.E. ACCEPTANCE OF BOOK RESULTS IN PAST ASS ESSMENTS AND RULE OF CONSISTENCY, BETTER BOOK RESULT IN THE YEAR UNDER APPEAL, ABSENCE OF ANY REAL ADVERSE FINDINGS, ABSEN CE OF ANY GLARING OR SERIOUS DEFECTS IN BOOKS, BOOKS HAVING B EEN DULY AUDITED, UNSUSTAINABILITY AND UNREASONABILITY OF AS SESSING OFFICER'S CONTENTIONS AND THE APPELLANT HAVING REAS ONABLY DISCHARGED ONUS, I HOLD THAT THE REJECTION OF BOOKS IN THE APPELLANT'S CASE IS IMPROPER AND UNJUSTIFIED. THE S AID ACTION OF THE ASSESSING OFFICER IS NOT JUSTIFIED. THIS FIN DING OF MINE IS ALSO FORTIFIED BY THE FINDINGS OF MY PREDECESSOR , WHILE ADJUDICATING THE SAME ISSUE IN . THE APPELLANT'S OWN CASE, FOR THE ASSESSMENT YEAR 2009-10. ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 26 7.5 IT IS ALSO A SETTLED MATTER UNDER THE LAW, THAT EVEN AFTER REJECTION OF BOOKS OF ACCOUNTS, THE INCOME SHOULD B E ESTIMATED ON SOME REASONABLE AND VALID BASIS. THE PAST RESULTS OF THE ASSESSEE AND ANALYSIS OF THE COMPARA BLE CASES ARE SUCH VALID BASES WHICH HAVE BEEN APPLIED IN NUM BER OF CASES. THERE IS NO BASIS WHATSOEVER FOR ASSUMPTION OF NET PROFIT IN CASE OF SUB-CONTRACTOR WORK. THE ESTIMAT ION IS JUST A BROAD GUESS AND HYPOTHETICAL WORKING, NOT BACKED BY ANY RATIONAL BASIS. FURTHER, IT IS ALWAYS EXPECTED IN THE MATTER OF ESTIMATION THAT QUANTIFICATION OF ESTIMATE SHOUL D HAVE COMMENSURATE RELATIONSHIP WITH THE DEFECTS AND SHOR T COMINGS. THIS ENSURES PROPER JUSTICE IN THE MATTER. IN THE APPELLANTS CASE, THE QUANTIFICATION OF ESTIMATE IS ENHANCED BY ABOUT RS. 6.24 CRORES, WHICH ENHANCEMENT IS APPROXIMATELY 201.3% OF THE RETURNED INCOME. THE CONTENTIONS OF THE ASSESSING OFFICER AS DISCUSSED I N THE FORGOING PARAGRAPHS DO NOT EVEN REMOTELY SUGGEST UNDERSTATEMENT OF INCOME TO SUCH A HUGE EXTENT . IT CLEARLY GIVES AN INDICATION THAT THE INCOME IS EXCESSIVELY ESTIMATED AND IT IS A CASE OF HIGH- PITCHED ASSESSMENT . THUS, EVEN THE ESTIMATION OF INCOME IS FOUND TO BE UNREASONABLE AN D UNSUSTAINABLE IN THE APPELLANTS CASE. 7.6 IN VIEW OF THE ABOVE DISCUSSION , I HOLD THAT NEITHER THE REJECTION OF BOOKS IS SUSTAINABLE NOR ESTIMATION OF INCOME IS REASONABLE IN THE APPELLANT ' S . CASE. I HEREBY DISAPPROVE THE ACTION OF THE ASSESSING OFFICER . SINCE I HAVE DISAPPROVED REJECTION OF BOOKS , THE QUESTION OF ESTIMATION DO NOT RAISE. THE ENTIRE ADDITION MADE BY ASSESSING OFFICER ON TH IS GROUND IS HEREBY DELETED . THE GROUND NO. 4 AND 5 OF THE APPEAL OF THE APPELLANT ARE HEREBY ALLOWED. HOWEVER , F OR THE ASSESSMENT YEAR 2009-10, MY PREDECESSOR HAS HELD TH AT A LUMP SUM ADDITION OF RS . 5 LACS WOULD MEET THE ENDS OF JUSTICE. SINCE THE TURNOVER OF THE APPELLANT HAS IN CREASED IN THE YEAR AS COMPARED TO THE PREVIOUS YEAR, I DIRECT THE ASSESSING OFFICER TO M A KE A LUMP SUM ADDITION OF RS. 10 LACS TO THE INCOME RETURNED TO TAKE CARE OF ALL THE MINOR DEFECTS OBSERVED BY THE ASSESSING OFFICER . ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 27 7.5 SAME HAS BEEN OPPOSED ON BEHALF OF BOTH PARTIES . LEARNED DEPARTMENTAL REPRESENTATIVE TOOK US TO VARI OUS PORTIONS OF ASSESSMENT ORDER IN THIS REGARD AND ULT IMATELY SUBMITTED THAT CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT BOOKS OF ACCOUNTS OF ASSESSEE CANNOT BE REJECTED. T HOUGH, ASSESSEE HAS NOT MAINTAINED STOCK REGISTER, WORK IN PROGRESS REGISTER, MEASUREMENT BOOKS AND QUANTITATIVE DETAIL S OF MATERIALS CONSUMED. CIT(A) ERRED IN LAW AND ON FA CTS IN HOLDING THAT PROVISIONS OF SECTION 145 ARE NOT APPL ICABLE TO THE FACTS OF THE CASE. CIT(A) ERRED IN LAW AND ON FACT S IN RESTRICTING ONLY ADDITION OF RS.10 LACS OUT OF TOTAL ADDITION O F RS.4,45,29,643/- MADE ON ACCOUNT OF PROFIT FROM OWN CONTRACT WORK. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF PROFIT FROM SUB- CONTRACT OF RS.21,48,129/-. HE ALSO ERRED IN LAW A ND ON FACTS IN DELETING ADDITION ON ACCOUNT OF COMMISSION EARNE D FROM IOCL OF RS.4,35,12,402/-. LEARNED DEPARTMENTAL REPRESENTATIVE ALSO OPPOSED THE PERUSAL OF ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED LOAN U/ S. 68 OF INCOME TAX ACT OF RS.10,90,000/-. FURTHER, LEARNED DEPARTMENTAL REPRESENTATIVE OPPOSED THE DELETION OF ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF OUTSTANDING BALANCES OF SUB-CONTRACTORS U/S. 68 OF THE ACT OF RS.3,51,98 ,022/-. 7.6 IN SUM AND SUBSTANCE, LEARNED DEPARTMENTAL REPRESENTATIVESUPPORTED THE ORDER OF ASSESSING OFFI CER. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPPO RTED THE ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 28 ORDER OF CIT(A) AS FAR AS RELIEF GRANTED ON ACCOUNT OF ABOVE ACCOUNTS AND OPPOSED THE ORDER OF CIT(A) WHEREIN CI T(A) HAS CONFIRMED THE ADDITION OF RS.10 LACS ON ACCOUNT OF ESTIMATION OF PROFIT. 8. NOW, LET US DEALS THESE ISSUES ONE BY ONE: 8.1 REGARDING REJECTION OF BOOKS OF ACCOUNTS AND ES TIMATION ADDITION ON ACCOUNT OF PROFIT FROM OWN WORK, WE FIN D THAT CIT(A) WAS JUSTIFIED IN HOLDING THAT NEITHER REJECT ION OF BOOKS OF ACCOUNTS NOR ESTIMATION OF INCOME WAS REASONABLE IN ASSESSEES CASE. SO, HE RIGHTLY DISAPPROVED THE AC TION OF ASSESSING OFFICER, SINCE CIT(A) DISAPPROVED THE REJ ECTION OF BOOKS, THE QUESTION OF ESTIMATION DOES NOT ARISE. HOWEVER, HAVING SAID SO, CIT(A) FOLLOWING THE LOGIC OF A.Y. 09-10 FROM HIS PREDECESSORS ORDER, WHEREIN LUMP SUM ADDITION OF R S.5 LACS WAS SUSTAINED, WHICH HAS BEEN CONFIRMED BY US IN PA RA 3 OF THIS ORDER FOLLOWING THE SAME REASONING, SINCE TURN OVER OF ASSESSEE HAS INCURRED IN THE YEAR AS COMPARATIVE TO PREVIOUS YEAR. CIT(A) HAS RIGHTLY DIRECTED THE ASSESSING OF FICER TO MAKE LUMP SUM ADDITION OF RS.10 LACS INSTEAD OF TOTAL AD DITION OF RS.4,45,29,643/- MADE ON ACCOUNT OF PROFIT FROM OW N WORK AS DISCUSSED ABOVE. THIS REASONED FINDING OF CIT(A) N EEDS NO INTERFERENCE FROM OUR SIDE, WHEREBY HE HAS GRANTED SUBSTANTIAL RELIEF TO ASSESSEE TAKING STRENGTH FROM ITS PREDECE SSORS ORDER FOR A.Y. 09-10. ACCORDINGLY, ORDER OF CIT(A) ON THE ISSUE IS UPHELD. ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 29 8.2 NOW, WE TAKE UP NEXT ISSUE WITH REGARDS TO RS.10,90,000/- ON ACCOUNT OF UNEXPLAINED LOANS U/S. 68 OF THE ACT, THE DETAILS OF WHICH ARE AS UNDER: SR. NO. LOAN CREDITORS PAN AMOUNT (RS.) 1 K. M. CHOUHAN (HUF) AAKHK1867P 4,25,000 2 MULUBHAI JADEJA 1,45,000 3 RAMBHAI JADEJA (IND.) AQDBJ1214C 1,95,000 4 LAKHIBEN JADEJA 1,00,000 5 PUJABEN CHAUHAN AJHPC7841F 2,25,000 8.2.1 IN APPEAL, CIT(A) OBSERVED THAT A SSESSING O FF ICER , WITHOUT M A KING A N Y INDEPENDENT INQUIR Y, LOANS T A KEN BY ASSESSEE FROM THE ABO V E PERSONS WERE TREATED AS UNEXPLAINED AND ADDED TO THE INCOME RETURNED. HOWEVER , FROM SUBMISSIONS MADE ON BEHALF OF ASSESSEE , CIT(A) NOTICED THAT ABOVE FI V E PERSONS HAD GIVEN LOANS BY WA Y OF ACCOUNT PA Y EE CHEQUES FROM THEIR INDIVIDUAL ACCOUN TS MAINTAINED WITH BANK OF BARODA . THE DETAILS OF CHEQUE NUMBERS ALON G WITH B A NK ACCOUNTS WERE ON RECORD. PAN IN CASE OF THREE PERSONS WERE A V AILABLE. ALL FI V E PERSONS HAVE ALSO F I LED CONFIRMATIONS IN SUPPORT OF THE LOANS GIVEN. SINCE, ASSESSEE HAS DISCHARGED THE ONUS OF E XPLAINING ABOVE FIVE LOANS TAKEN DURING PREVIOUS YEAR UNDER CONSIDERATION, ASSESSING OFFICER COULD HAVE TAKEN N ECESSARY ACTION AS PER LAW IN CASE OF ABOVE FIVE PERSONS AFT ER DUE VERIFICATION OF THEIR SOURCES OF INCOME FROM WHICH THESE LOANS WERE GIVEN TO ASSESSEE BUT HE FAILED TO DO SO FOR R EASONS KNOWN TO HIM. ACCORDINGLY, ADDITION MADE AT RS.10,90,000 /- ON ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 30 ACCOUNT OF UNEXPLAINED LOANS WAS RIGHTLY DELETED BY CIT(A). THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFEREN CE FROM OUR SIDE. WE UPHOLD THE SAME. 8.3 NEXT ISSUE IS WITH REGARDS TO ADDITION OF RS.2, 53,30,017/- ON ACCOUNT OF UNEXPLAINED OUTSTANDING BALANCES OF S UB- CONTRACTORS U/S. 68 OF INCOME TAX ACT, 1961. ASSES SING OFFICER IN PARA 4 OF ASSESSMENT ORDER HAS MADE FOLLOWING DI SCUSSIONS FOR THIS ADDITION: ON GOING THROUGH THE BALANCE SHEET IT IS SEEN THAT THERE ARE 40 NEW ACCOUNTS IN THE NAME OF SUB CONTRACTORS INVO LVING AN AMOUNT OF RS. 9,47,35,025 / -. THESE ACCOUNTS HAVE TO BE EXPLAINED BY FILING EVIDENCES REQUIRED IN TERMS OF SEC. 68 OF THE I. T. ACT . IN RESPECT OF THE FOLLOWING SUBCONTRACTORS' ACCOUNTS HAS NOT FILED ANY DETAILS AT ALL. THE DETA ILS OF THE ACCOUNTS ARE AS UNDER : SR . NO. NAME OF THE SUB - CONTRACTOR OUTSTANDING CREDIT BALANCE IN BALANCE SHEET 1 M/ S. BALVIN CONSTRICTION 173 9915 2 M/ S. RADHESHVAM BUILDERS 7732527 3 SHRI BHARATBHAI P . JOSHI 1766803 4 SHRI DAMJIBHAI K VALA 1764146 5 SHRI GHANSHYAMBHAI L . 1756819 6 SHRI J.N. BHATT 1713351 7 SHRI NANABHAI AALABHAI AAVAR 1665118 8 SHRI NARENDRAS INH BHARATSINH 289060 9 SHRI PANKAIBHAI R NAKARANI 1764364 10 SHRI PANKAIKUMAR P. BHATT 1763339 11 SHRI VASANTBHAI V . RAFALIYA 27848901 12 M/ S . KRISHNA BOREWELL 188239 13 M/ S. SHREE GURUII SERVICES 401446 TOTAL 25330017 SINCE THE ASSESSEE HAS FAILED TO COMPLY WITH THE REQUIREMENTS OF SECTION 68 OF THE IT ACT. THE AMOU NT OF ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 31 RS.2,53,30,017/- IS ADDED U/S. 68 OF THE IT ACT AND INCLUDED IN THE TOTAL INCOME COMPUTATION . THUS ASSESSING OFFICER MADE ADDITION OF RS. 2,53,30 ,017/-. 8.3.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN AUTHORIZED REPRESENTATIVE OF ASS ESSEE OBJECTED THE ADDITION IN FOLLOWING MANNER: 2.0 THE NEXT GROUND IS AGAINST THE ADDITION OF RS.25330017/- BEING THE AMOUNTS OF 13 SUB CONTRACTO RS APPEARING IN THE BALANCE SHEET. WE TAKE ROAD BUILD ING CONTRACT FROM THE GOVERNMENT. WE GIVE SOME OF THES E TO SUB CONTRACTORS WHO DO THE CONSTRUCTION ON OUR BEHA LF. WE SUBMIT THAT THE 13 PERSONS ARE OUR SUB CONTRACTORS. WE HAD FILED COPIES OF ACCOUNTS OF THE SUB CONTRACTORS SHOWING THE AMOUNT CREDITED IN THEIR ACCOUNT AND THE TDS MA DE IN THEIR ACCOUNT. WE HAD ALSO SUBMITTED THE COPIES OF ACCOUNTS OF THE SUBSEQUENT YEAR WHERE WE HAVE MADE PAYMENT TO THEM. COPIES OF THESE ACCOUNTS ARE ON P AGES 74 ONWARDS OF THE PAPER BOOK. HAVING CONSIDERED THE SAME, CIT(A) GRANTED RELIEF T O ASSESSEE. SAME HAS BEEN OPPOSED ON BEHALF OF REVENUE WHO SUBM ITTED THAT CIT(A) WAS NOT JUSTIFIED IN DELETING ADDITION IN QUESTION. ACCORDINGLY, ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER ON THE ISSUE BE RESTORED. ON OTHER HAND, L EARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CI T(A). 8.3.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MAT ERIAL ON RECORD, WE FIND THAT ASSESSING OFFICER HAS NOT M ADE ANY INQUIRIES IN RESPECT OF ABOVE 13 PERSONS IN ORDER T O VERIFY THE ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 32 CAPACITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. ASSESSEE HAS PRODUCED RELEVANT INFOR MATION BEFORE CONCERNED REVENUE OFFICER, BY FILING LEDGER ACCOUNTS , CON F IRMATIONS AND PA Y MEN T S MAD E TO THESE PERSONS IN SUBSEQUENT ASSESSMENT YEAR FOR VERIFICATION . S AME WERE V ERI F IED AND FOUND CORRECT . HOWEVER , ASSESSING OFFICER HAS CHOSEN TO M A KE THIS ADDITION WITH O U T APPRECIATING THE FACTUAL INFORMATION EVIDENCE A V AILABLE BEFORE HIM . N O MAT E RIAL . H AS B EEN BROUGHT ON RECORD BY ASSESSING OFFICER TO J US T IF Y THE A D DIT ION. T HERE F OR E, CIT(A) WAS JUSTIFIED IN DELETING ADDITION OF RS . 2 , 53 , 30 , 017 / - U / S . 68 O F THE A C T. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SI DE. WE UPHOLD THE SAME. 8.4 NEXT ISSUE IS WITH REGARDS TO ADDITION OF RS.3, 51,98,022/- U/S. 41(1) OF THE ACT. THE RELEVANT PARAGRAPH OF A SSESSMENT ORDER READS AS UNDER: 5 . ON GOING THROUGH THE BALAN CE SHEET , IT IS S E EN THAT 92 AC C OUNTS OF SUNDR Y CREDITORS ARE DORMANT ACCOUNTS SINCE LAST THREE Y EARS . THE AMOUNT INVOLVED IN TH E SE ACCOUNTS IS RS . 2 , 22 , 52 , 092 / - . SIMILARL Y THERE ARE 19 ACCOUNTS OF SUB-CONTRACTORS WHI C H ARE DORMANT ACCOUNTS SINCE LAST THRE E YE ARS . THE AMOUNT IN V OL V ED IN THES E A CCO UNT S I S RS . 1 , 29 , 45 , 930 / -. THE ASS E S SEE HAS STAT E D TH AT TH E A CCO UNT S HA VE B EE N K E PT IN V I EW OF TH E OBLIGATION GUARANT E E OF THE CO NTRA C T S AND IN VI E W OF S OM E P E NDIN G DISPUT ES . E XCE PT FO R THIS BLAND STAT E MENT NO EVID E NCE OR MAT E RI A L HA S B EE N FI L E D B Y TH E A SSESSEE TO PR OVE THAT ALL THESE ACCOUNTS AR E LIV E AND SUBSISTIN G ACCO UNT S . S IN CE, TH E A SSES S EE H AS NOT B EE N ABL E TO FIL E AN Y MAT E RIAL E V IDENC E T O ' S H OW T H A T ALL TH ESE ACCO UNTS AR E A C T IV E , L IVE A ND S UB SIS TIN G A CC OUN TS TH E PRO V I S ION S OF SEC : 41 ( 1 ) A R E SQUA R E L Y AP PLI CA BL E ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 33 T O T H E F A CTS OF TH E C A S E A S IT CA N S AF E L Y B E PR ES UM ED TH AT AL L T H ESE L IA B I LITI ES H AVE CE A SED TO EXIST O N A CCO UNT OF TH E IN A B I LI TY O F TH E ASSESSEE T O FILE TH E MATE R IAL EVIDE N CES . A D D IT IO N OF RS . 3 , 51 , 9 8, 022 / - IS TH E R E FORE MAD E U /S. 4 1 ( 1 ) OF T HE IT AC T AND I NCLUDED I N THE T OT AL IN CO M E C O MPUTATION . 8.4.1 AS AGAINST ABOVE FINDINGS MADE BY ASSESSING O FFICER, ASSESSEE, IN PAPER BOOK FURNISHED BEFORE CIT(A) HAS FILED OBJECTIONS IN FOLLOWING MANNER: 3 .0 THE N EX T GROUND R E L A T ES T O TH E A D D I T I ON O F R S 3 , 51 , 9 8 , 022 / - UND E R SEC TI ON 4 1[1] O F TH E AC T . W E DO NO T HA VE TH E D E T A IL S OF TH E A M O UNT S ADDED BY T HE AO . T HE DETA I LS OF TH E P E R S ONS APP E ARIN G IN A S S UNDR Y C R E D ITO R S AR E E N C L OSED 3 . 1 W E A R E I N TH E BU SI N ESS OF CO N ST RU CTION OF R OADS AS PER THE CONTRACTS TAKE N FROM T HE GO VE RNM E NT . A CO P Y OF T H E CON T RAC T I S ENC L OSED. AS PER THE TE R MS OF THE CONTRACT THE G OVE RNMENT W ITH H O L DS CE RTA I N AM OU NT S T ILL TH E E N D OF T H E CO NTR ACT PE R IO D. WE I N TU R N H O LD C ERTAIN AM O UNT S OF TH E SUB CON TR ACTO R S F O R S P EC IFI C PE R FO RM A N CE OF TH E CO NTR ACTS. TH E A M O U N T S OU TS TANDIN G I N TH E ACCO UNT S OF T HE S U B CO NTR AC T ORS A R E O N ACCO UNT OF T H ESE W ITHH O LDIN GS. WE AR E E N C L OS IN G H E R EWI T H 2 SA MPL ES TO SHOW H OW T HE EN T IRE PAYMENT IS M ADE A F TE R COMP L E TI O N OF THE CONTRACT PERIOD . P L EASE SEE PAGE 291 OF T HE PAPER BOOK. ASSESSEE , IN W R I TTEN SUBM ISS ION, H AS STA T ED BEFORE CIT(A) TH AT SAI D B A L A N C E S W ERE HELD TILL THE END OF CONTRACTS E X ECUTED B Y S UB C O N TRAC TO RS AS A M ATTER OF FI NANCIAL PRUDENCE AND SECURIT Y. IT WAS FURTHER STATED THAT S AID OUT S T A NDIN G B A L A N C E S WE RE PAID TO TH E S UB-CONTRACTORS , SUBSEQUENTL Y AFTER COMPLETION OF CONTR AC T W ORK . IN S UPPO R T OF THIS , ASSESSEE HAS FURNISHED LEDGER ACCOUNTS OF SUB CONTRACTORS AGAINS T W HOM THE OUT ST ANDIN G S W ERE SHOWN IN THE BALANCE SHEET . T HE ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 34 DETAILS OF PA Y M E N T S M A D E TO TH E M WERE ALSO FURNISHED. FOLLOWING HON ' BLE GUJARAT HIGH COURT, WHEREIN HONBLE COURT REFERRING THE JUDGEMENT O F HON ' BLE SUPREME COURT IN CASE OF CIT V S. SUGAULI SUGAR WORKS ( P ) LTD. ( 1999 ) 236 ITR 518 (SC) HELD AS UNDER: TH E CESSATION OF LIABILIT Y HA S T O B E E ITH E R B Y R EASO N OF O P E R A TI O N O F L AW I . E . , O N THE LIABILITY BECOMING UNENFORCEABL E AT LA W B Y TH E C R E DITOR AND TH E D E BTOR D EC LARIN G UNEQUIVOCALL Y HI S INTENTION NOT TO HON O UR HI S LIAB I L I T Y W H E N P AY M E NT I S D E M A ND E D B Y T H E CR E DITOR , OR A C ONTRACT B E TW EE N TH E PARTI ES, OR B Y DISC H A R GE OF TH E D E BT - TH E D E BT O R MAKING PA Y MENT TH E R E OF T O HI S C R E DIT O R . IN TH E PR ESE N T CASE, A DMITT E DL Y TH E R E I S N O D EC LARATION B Y TH E A S S E S SEE TH A T IT D OES N O T I NT E ND T O H O N O UR I T S LI A BILITI ES N O R I S TH E R E AN Y DISCHARGE OF TH E DEBT . IN TH E AFOR E SAID PR E MISE S, A S N O EVE NT HAD TAK E N PLA CE I N ' TH E Y EAR UNDER CONSIDERATION TO INDICATE R E MI SS ION OR CE S S ATI O N OF TH E LIABILITI ES IN QU ES TION , THE PROVISION S OF SECTION 41 ( 1 ) CANNOT HAVE B EE N INVOK E D . 8.4.2 THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY RECORD TO SUGGEST THAT SAID LIABILITIES WERE CEASED TO EXIST E I THER BY OPERATION OF LAW I.E ., ON THE LIABILITY BECOMING UNENFORCEABLE AT LAW BY THE CREDITOR AND THE DEBTOR DE C LAR I NG UNEQUIVOCALL Y H I S INTENTION NOT TO HONOUR HIS LIABILIT Y WHEN PAYMENT IS DEMANDED B Y THE CREDITOR , OR A CONTRACT BETWEEN THE PARTIES , OR BY DISCHARGE OF THE D E BT. THE DEBTOR M AK ING PA Y MENT THEREOF TO HIS CREDITOR , PROVISIONS OF SECTION 41 ( 1 ) CANNOT BE IN VOK ED. T HEREFOR E, ON FACT AND LAW, ADDITION MADE OF RS . 3 , 51 , 98 , 022 / - U/S. 41 ( 1 ) WAS NOT JUSTIFIED AND SAME WERE RIGHTLY DELETED BY CIT(A). WE UPHOLD THE SAME . ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 35 8.5 NEXT ISSUE IS WITH REGARDS TO ADDITION OF RS.21 ,48,129/- ON ACCOUNT OF PROFIT FROM S UB CONTRACTORS . ASSESSING OFFICER HAS ESTIM A TED 10 % OF RECEIPTS ATTRIBUTABLE TO SUB CONTRACTORS AT RS. 21 , 48 , 129 / -. CIT(A) D I D NOT F IND AN Y S E P A RATE DI S CU S S I ON M A DE ON TH IS A S P E CT IN ASSESSMENT ORDER . THEREFORE , THE BA SIS O F SAME ADDIT I ON WAS MISSING. ASSESSEE IN ITS SUBMISSIONS HA S FILED OBJECTION S A GA INST TH IS A DDITION S IN FOLLOWING MANNER: THE AO HAS MADE A SEPARATE ADDITION OF RS.21,48,12 9/- ON ACCOUNT OF PROFIT FROM SUB CONTRACT. ASSESSEE HAS SHOWN THIS AS HIS INCOME WHILE WORKING OUT THE RETURNED I NCOME. THE SAME ALSO HAS BEEN SHOWN AS INCOME IN THE PROFI T AND LOSS ACCOUNT. ASSESSEE SUBMITS THAT THE GROSS PROF IT AND NET PROFIT AS SHOWN IS VERY REASONABLE AND SEPARATE SUBMISSIONS HAVE BEEN MADE IN THIS WRITTEN SUBMISSI ONS JUSTIFYING THE SAME. ASSESSEE THEREFORE SUBMIT THA T THE SEPARATE ADDITION MAY PLEASE BE DELETED. 8.5.1 IN VIEW OF ABOVE , CIT(A) AGREED WITH THE SUBMISSIONS OF ASSESSEE THAT THERE WAS NO CASE OF SEPARATE ADDI TION OF RS.21,48,129/- ON ACCOUNT O ESTIMATION OF 10% ON VA LUE OF WORKS SUB CONTRACTED. ACCORDINGLY, CIT(A) WAS JUST IFIED IN DELETING ADDITION OF RS.21,48,129/-. WE UPHOLD THE SAME. 8.6 NEXT ISSUE IS WITH REGARDS TO THE ADDITION OF RS . 4 , 35 , 12 , 402 / ON ACCOUNT OF PROFIT FROM COMMISSION FROM IOCL . ASSESSING OFFICER HAS MADE THIS ADDITION BY OBSERV ING AS UNDER: THE ASSESSEE HAS ALSO SOLD ASPHALT TO ITS SUB-CONT RACTORS AT ITS OWN COST PRICE AND HA S NOT EARNED ANY PROFITS FROM ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 36 THESE SALES. FURTHER IT IS ALSO ADMITTED THAT THE C OMMISSION EARNED BY THE ASSESSEE ON THE PURCHASE OF ASPHALT H AS AL S O NOT BE E N PAS SE D ONTO THE SUB-CONTRACTORS I . E . THE ENTIRE COMMISSION INCOME EARNED BY THE ASSESSEE ON PURCHAS E OF ASPHALT HAS BEEN RETAINED BY HIM . MOREOVER , HE HAS DEBITED THE ENTIRE PURCHASE PRICE OF ASPHALT AS HIS PURCHAS E COST AND HAS CLAIMED THE SAME AS HIS REVENUE EXPENDITURE . THUS , THE ENTIRE COMMISSION INCOME OF RS. 4 , 35 , 12 , 402/- EARNED BY HIM ON PURCHASE S OF ASPHALT WHICH IS HIS RAW MATERIAL ARID WHICH HAS BEEN CONSUMED WHILE EXECUTI NG THE CONTRACTS IS HIS CLEAR PROFIT AND THE SAME NEEDS TO BE SEPARATELY TAXED IN TOTO . 8.6.1 ASSESSEE, IN APPEAL, OBJECTED THE SAME AS UND ER: WE DO THE BUSINESS OF ROAD CONSTRUCTION. DURING T HIS BUSINESS WE RECEIVE ASPHALT FROM THE GOVERNMENT. W E RECEIVE COMMISSIONS ON THE; SAME AS WE BUY IN BULK FROM THE AGENCIES SELLING THE SAME. THIS ASPHALT IS USE D IN TWO PLACES [A] BY OURSELVES [B] BY OUR SUB CONTRACTORS. WE SUPPLY THE ASPHALT TO THE SUB CONTRACTORS ON A NO P ROFIT NO LOSS BASIS. THE ASPHALT USED BY US REDUCES OUR COS T OF THE CONSTRUCTION OF THE ROAD. THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING A SEPARATE ADDITION OF RS.4,35, 12,402/- ON ACCOUNT OF COMMISSION FROM IOCL. THIS COMMISSIO N REDUCES THE VALUE OF THE COST OF GOODS FROM WHAT W E USE FOR THE ROAD CONSTRUCTION. IN THIS BACKGROUND, INFERENCE DRAWN BY ASSESSING OF FICER THAT ENTIRE COMMISSION INCOME EARNED ON PURCHASE OF ASPHALT FROM IOCL WAS FOUND FAULTY BY CIT(A). ASSESSEE HAS PURC HASED ASPHALT FROM OIL COMPANIES TO THE TUNE OF RS . 27 , 01 , 44,775 / - , WHICH WAS DEBITED UNDER THE HEAD MATERIAL PURCHASE D FOR ASSESSMENT YEAR 2010-11 . SIMILARLY, THE COMMISSION EARNED ON THIS PURCHASE AT RS . 4 , 35 , 12,402 / - HAS BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT AS INCOME UNDER THE HEAD B USINESS INCOME . ASSESSING OFFICER DID NOT APPRECIATE THAT ASPHALT W AS ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 37 ONE OF THE MAJOR RAW MATERIALS FOR LAYING OF BITUME N ROADS AND WITHOUT THIS, BITUMEN ROADS CANNOT BE LAID . THERE WAS NO DISPUTE ABOUT THE FACT THAT ASSESSEE AS WELL AS ITS SUB CONTRACTORS HAD UTILIZED THE ASPHALT IN THE LAYING OF ROADS. STAND OF ASSESSEE HAS BEEN THAT S AID MATERIAL WAS SUPPLIED TO SUB CONTRACTORS TOWARDS THE WORK EXECUTED BY THEM O N A NO PROFIT NO LOSS BASIS AND THE COST WILL BE RECOVERED FROM THEM ACCORDINGLY ON SETTLEMENT OF THE BILLS. IN SO FAR AS ASSESSEES OWN WORKS ARE CONCERNED , THE COMMISSION IF NETTED OUT AGAINST THE ASPH AL T PURCHASED FROM OIL COMPANIES, COST GETS REDUCED T O THAT EXTENT. THUS, ADDITION MADE OF RS.4,35,12,402 /- ON ACCOUNT OF COMMISSION FROM IOCL WAS FOUND BASELESS. SAME WAS RIGHTLY DELETED BY CIT(A). WE UPHOLD THE SAME. 9. IN THE RESULT, REVENUES AS WELL AS ASSESSEES A PPEALS FOR BOTH YEARS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 27 TH DAY OF MARCH, 2015. SD/- SD/- (N. S. SAINI) (SHAILENDR A KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R RAJKOT : DATED 27/03/2015 TRUE COPY S K SINHA COPY OF THE ORDER FORWARDED TO: - 1. THE ASSESSEE. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, RAJKOT 6. GUARD FILE. ITA NO. 36 & 42/RJT/13 & 221 & 323/RJT/14 FOR A.YS. 09-10 & 10-11 [M/S. AMBER BUILDDERS VS. A CIT] PAGE 38 BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, RAJKOT