DCIT, CHITTORGARH V. Shri Amol Agarwal, CHITTORGARH

ITA 425/JODH/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4810 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 30-11-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 05-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K DAS

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, JODHPUR BEFORE SHRI B.P JAIN ACCOUNTANT MEMBER AND SHRI PARTHA SAR A THI CHAUDHURY JUDICIAL MEMBER ITA NO.425/JODH/2015 ASSESSMENT YEAR:2012 - 13 THE DCIT VS. SHRI AMOL AGARWAL CIRCLE B - 65, BAPU NAGAR, SENTHI CHITTORGARH CHITTORGARH PAN NO. ABGPA6736J (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SANDEEP JHANWAR DEPARTMENT BY : SH. A.K. DAS DATE OF HEARING : 30/11/2016 DATE OF PRONOUNCEMENT : 30/11/2016 ORDER PER PARTHA SARATHI CHAUDHURY , JM THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) - 1 DT. 27/05/2015 ON THE FOLLOWING GROUNDS OF APPEAL: 1. ALLOWING RELIEF OF RS. 42,18,209/ - BY REDUCING THE TRADING ADDITION FROM RS. 46,28,256/ - T O RS. 6,02,601/ - MADE BY APPLYING THE NET PROFIT RATE OF 8% AFTER INVOKING THE PROVISIONS OF SECTION 145(3)OF THE I.T. ACT WITHOUT APPRECIATING THE FACTS THAT THE SAID TRADING ADDITION HAS RIGHTLY BEEN MADE BY THE ASSESSING OFFICER AFTER REJECTING THE ASSE SSEES BOOKS OF ACCOUNT IN VIEW OF VARIOUS MAJOR DEFECTS NOTICED I.E. NON MAINTENANCE OF SITE WISE RECORD, STOCK REGISTER, QUANTITATIVE REGISTER AND NON PRODUCTION OF COMPLETE VOUCHERS FOR PAYMENT OF WAGES. 2 2. DIRECTING TO APPLY NET PROFIT RATE AT 1% AS AGAINST 8% APPLIED BY THE AO IGNORING THE SPECIFIC DEFECTS POINTED OUT IN THE BOOKS OF ACCOUNTS AND ALSO IGNORING THE FACTS THAT HONBLE ITAT UPHELD THE BOOK RESULT IN A.Y. 2010 - 11 WHEREIN THE NET PROFIT OF 3.417% WAS DECLARED BY THE ASSESSEE HIMSELF AND A LSO IGNORING THAT THE ASSESSEE ITSELF DECLARED N.P. @ 4.17% IN A.Y. 2011 - 12 IN ITS OWN CASE UNDER THE SIMILAR FACTS. 3. ACCEPTING THE N.P. RATE AT A VERY LOW RATE OF 1% WITHOUT GIVING ANY REASONING AND WITHOUT DIFFERENTIATING THE FACTS OF ASSESSEES CASE OF A.Y. 2012 - 13 VIS - - VIS A.Y. 2010 - 11 & A.Y. 2011 - 12 WHEREIN THE ASSESSEE HIMSELF DECLARED N.P. OF 3.41% AND 4.17% RESPECTIVELY. 4. IGNORING ITS OWN OBSERVATION THAT FACTS OF THIS CASE ARE SAME AS THAT IN EARLIER YEARS AND THEREBY ERRED IN NOT APPLYING THE BROADLY THE SAME N.P. AS DECLARED BY ASSESSEE IN A.Y. 2011 - 12 I.E. 4.17% OR ATLEAST IN A.Y.2010 - 11 OR AVERAGE OF THESE TWO YEARS. 2. THAT, ALL THESE GROUNDS OF APPEAL ARE INTERRELATED TO EACH OTHER BEING RELIEF GRANTED OF RS. 42,18,209/ - AND APPLICATION OF NET PROFIT RATE @1% AS AGAINST @ 8% AS APPLIED BY THE AO AND HENCE ALL THESE G ROUNDS ARE HEARD AND DECIDED TOGETHER FOR THE SAK E OF CONVENIENCE. 3. THE BRIEF FACTS RELATING TO THIS APPEAL IS THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM CONTRACT BUSINESS AND E - FILED HIS RETURN ON 30/09/2012 DECLARING TOTAL INCOME OF RS. 18,39,630/ - . 4. DURING THE ASSESSMENT PROCEEDING AS REQUIRED BY THE AO THE ASSESSEE HAS PRODUCED COMPLETE SET OF BOOKS OF ACCOUNT. THE AO MADE A COMPARISON OF GROSS PROFIT (G . P . ) AND NET PROFIT(N . P . ) RATE DECLARED IMMEDIATELY PRECEDING ASSESSMENT YEARS AND ON COMPARISON THE AO OBSERVE THAT THERE WAS A DE CLINE 3 IN THE N . P . DECLARED IN THE YEAR UNDER CONSIDERATION. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE G . P . MARGIN DURING THE YEAR AS DECREASED FROM 13.61% IN PRECEDING YEAR TO 11.67% IN THE CURRENT YEAR. SIMULTANEOUSLY THEN N . P . MARGIN HAS ALSO DECREAS ED FROM 4.16% IN THE PRECEDING YEAR TO 2.95% DURING THE YEAR. THE DECREASE IN G . P . MARGIN AND N . P . MARGIN IS NOT VERY SIGNIFICANT. THE MARGIN HAS DECREASED DURING THE YEAR DUE TO INCREASE INFLATION AND INCREASE COMPETITION. I T WAS PLEADED BEFORE THE AO THAT THE N . P . DECLARED BY THE ASSESSEE IS BETTER THAN THAT OF THE PRECEDING YEAR, THE TRADING RESULTED DECLARED BY THE ASSESSEE MAY BE ACCEPTED. HOWEVER, THE AO DID NOT ACCEPT THE ARGUMENTS AS THE N . P . DECLARED ON TOTAL TURNOVER OF RS. 6,17,80,20/ - AT RS. 17,13,044/ - INCLUDED RENTAL INCOME OF RS. 45,20,490/ - AND IF THIS IS EXCLUDED FROM THE N . P . DECLARED THEN THE N . P . WORKS OUT TO RS. 1,92,554/ - WHICH INTERMS OF PERCENTAGE COMES TO 0.32% AS AGAINST THE NET PROFIT OF 3.93% DECLARED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. IN ORDER TO VERIFY THE CORRECTNESS AND GENUINENESS OF THE N . P . DECLARED THE AO EXAMINED THE BOOKS OF ACCOUNT A ND VOUCHERS PRODUCED BEFORE HIM, A ND ON VERIFICATION FOUND OUT THE FOLLOWING DEFECTS : 1. THE CONTR ACT WORK OF THE ASSESSEE WAS FOUND TO BE SCATTERED AT VARIOUS SITES IN DIFFERENT DISTRICTS AND THE ASSESSEE DID NOT MAINTAIN SITE - WISE RECORDS. 2. THE ASSESSEE HAS NEITHER SHOWN ANY CLOSING STOCK NOR ANY WORK IN PROGRESS AND IT TOTALLY UNBELIEVABLE THAT T HERE REMAINS NO MATERIALS IN VARIOUS SITES PARTICULARLY WHEN THE WORK OF THE ASSESSEE WAS SCATTERED AT DIFFERENT DISTRICT. 4 3. THE ASSESSEE HAS KEPT CONSOLIDATED ACCOUNT AND IN ABSENCE OF SITE - WISE ACCOUNTS, THE TRADING RESULTS WERE NOT VERIFIABLE. 4. T HE ASSESSEE DID NOT MAINTAIN SITE - WISE LABOUR REGISTER AND DID NOT PRODUCE COMPLETE VOUCHERS FOR PAYMENT OF WAGES. 5. THE ASSESSEE DID NOT MAINTAIN ANY STOCK REGISTER FOR MATERIAL / GOODS SHOWING DAY TO DAY INCOMING AND OUTGOING. 6. THE ASSESSEE HAD CLAI MED SUBSTANTIAL EXPENSES UNDER THE HEAD MATERIAL PURCHASE, REPAIR AND MAINTENANCE EXPENSES, FREIGHT CHARGE EXPENSES AND WAGES WHICH WERE MADE IN CASH AND MOST OF THE EXPENSES WERE SUPPORTED BY HAND MADE VOUCHERS WERE NOT VERIFIABLE. 5. THAT, THEREAFTER THE AO REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE BOOKS RESULTS DECLARED BY THE ASSESSEE SHOULD NOT BE REJECTED BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. 6. THAT, AFTER CONSIDERING THE REPLY OF THE ASSESSEE COUPLED W ITH THE DECREASE IN THE N . P . DECLARED, IT WAS HELD BY THE AO THAT THE PROVISIONS OF SECTION 145(3)OF THE ACT IS APPLICABLE IN THE CASE OF THE ASSESSEE AND REJECTED THE TRADING RESULTS DECLARED BY THE ASSESSEE AND APPLIED A N . P . RATE OF 8% ON DECLARED GROSS CONTRACT RECEIPTS AND THIS HAS RESULTED IN THE DETERMINATION OF N . P . FROM CONTRACT BUSINESS AT RS. 48,20,810/ - . 7. THAT, BEFORE THE LD.CIT(A) - 1 , HE HELD IN HIS ORDER THAT ON CONSIDERATION THE SUBMISSION OF THE ASSESSEE IN THE ASSESSMENT ORDER AND OTHER RE LEVANT MATERIAL ALONGWITH JUDICIAL PRONOUNCEMENTS REFERRED AND RELIED UPON BY THE AO AND THE ASSESSEE, THE REASONS GIVEN BY THE AO FOR REJECTION AND INVOCATION OF PROVISIONS OF SECTION 145(3) OF THE ACT , IT IS SEEN THAT THE AO HAS POINTED OUT THE SAME 5 DEF ECTS AS POINTED OUT IN THE ASSESSMENT YEARS 2008 - 09, 2009 - 10 AND 2010 - 11 AND NOTHING NEW HAS BEEN FOUND AND POINTED OUT TO WHICH THE AO WAS NOT IN A POSITION TO ADDUCE THE CORRECT INCOME FROM THE REGULAR BOOKS OF ACCOUNT MAINTAINED AND AUDITED. THE DEFECTS POINTED OUT BY THE AO WERE NOT SIGNIFICANT AND GENERAL IN NATURE AND THEREFORE THE SAME CANNOT BE MADE A BASIS FOR REJECTION OF BOOKS OF ACCOUNT REGULARLY MAINTAINED DURING THE COURSE OF BUSINESS. THIS VIEW IS SUPPORTED BY DECISION OF HONBLE SUPREME COUR T IN THE CASE OF CIT VS. PADAMCHAND RAMGOPAL (1970) 76 ITR 719 (SC) WHERE IT HAS BEEN HELD I NSIGNIFICANT MISTAKES FOUND IN ONE YEAR CANNOT JUSTIF Y REJECTION OF ACCOUNT IN THE SUBSEQUENT YEAR . THE LD. CIT (A) - 1 FURTHER OBSERVED THAT IN THE EARLIER ASSESS MENT YEARS I.E; 2008 - 09 TO 2010 - 11 THE ISSUE OF REJECTION OF BOOKS OF ACCOUNT AND APPLICATION OF PROVISION OF SECTION 145(3) OF THE ACT IS TRAVELLED UP TO THE HONBLE ITAT LEVEL AND THE HONBLE JURISDICTIONAL ITAT IN ALL THE THREE ASSESSMENT YEARS VIDE TH EIR ORDER DT. 25/09/2013 IN ITA NO. 391/JODHPUR/2013 FOR THE A.Y. 2009 - 10 ORDER DATED 25/09/2014 IN ITA NOS. 412 & 413/JU/2014 FOR THE ASSESSMENT YEARS 2008 - 09 AND 2010 - 11 HELD THAT THE PROVISIONS OF SECTION 145(3) OF THE ACT CANNOT BE MADE APPLICABLE IN T HE CASE OF THE ASSESSEE AS THE DEFECTS POINTED OUT BY THE AO WAS GENERAL IN NATURE. 8. THE LD. CIT (A) - 1 IN THE YEAR UNDER CONSIDERATION FOLLOW ED THE DECISION OF HONBLE JURISDICTIONAL TRIBUNAL IN THE CASE OF THE ASSESSEE HIMSELF AS MENTIONED ABOVE AND CONSIDERING THE FACTS THAT AO HAS REJECTED THE BOOKS OF ACCOUNT INVOKING SECTION 145(3) OF THE ACT FOR SOME REASONS AS THAT OF THE EARLIER YEARS 6 HE LD THAT THERE WAS NO CASE FOR INVOCATION OF THE PROVISIONS OF SECTION 145(3) OF THE ACT AND THE SAID INVOCATION IS UNJUSTIFIED. THE LD. CIT (A) - 1 FURTHER HELD THAT TO MEET THE ENDS OF JUSTICE IT WOULD BE ADEQUATE IF THE N . P . OF THE ASSESSEE FROM CONTRACT BU SINESS IS ESTIMATED @ 1% ON DECLARED TURNOVER OF RS. 60,260,130/ - PARTICULARLY CONSIDERED THE INCREASE IN THE PRICE OF VARIOUS MATERIALS, LABOUR PAYMENTS ETC. THUS ON THE BASIS OF THE N . P . OF THE ASSESSEE FROM THE CONTRACT BUSINESS WORKS OUT TO RS. 6,02,60 1/ - IN PLACE OF 48,20,810/ - DETERMINED BY THE AO, THE ASSESSEE GOT RELIEF OF RS. 42,18,209/ - . 9. WE HAVE PERUSED THE RECORDS OF THE CASE, FACTS AND CIRCUMSTANCES OF THE CASE AND THE RIVAL CONTENTION AND WE ARRIVE AT OUR CONSIDERED VIEW THAT THE LD. CIT (A) - 1 IN HIS ORDER AS HAS BEEN BROUGHT ON RECORD, RELIED ON THE DECISION OF THE JURISDICTIONAL COORDINATE BENCH OF THE ITAT JODHPUR IN THREE ASSESSMENT YEARS VIDE ORDER DT. 25/09/2013 IN ITA NO. 391/JODHPUR/2013 FOR A.Y. 2009 - 10 ORDER DATED 25/09/2014 IN ITA NO. 412 & 413/JH/2014 FOR THE ASSESSMENT YEARS 2008 - 09 & 2009 - 10 WHEREIN IT WA S HELD THAT THE PROVISION OF SECTION 145(3) OF THE ACT CANNOT BE MADE APPLICABLE IN THE CASE OF THE ASSESSEE ON THE DEFECTS POINTED OUT BY THE AO SINCE WAS GENERAL IN NATURE AND ON BASIS OF THESE DECISIONS THE LD. CIT(A) - 1 HAS DECLARED THE INVOCATION OF SECTION 145(3) OF THE ACT AS UNJUSTIFIED AND AT THE SAME TIME THE LD. CIT(A) - 1 HAS ESTIMATED THE RATE OF N . P . OF THE ASSESSEE AT 1%. 10. WE FIND NO INFIRMITY WITH THE FINDINGS OF THE LD. CIT(A) - 1 WHICH IS BASED ON THE COORDINATE BENCH OF ITAT JODHPUR DECISIONS AND WE THEREFORE UPHOLD THE 7 ORDER OF THE LD. CIT(A) - 1 AND AT THE SAME TIME SUSTAIN THE N . P . ESTIMATED @ 1% , SINCE ON THIS ISSUE NO APPEAL IS PREFERRED BY THE ASSESSEE. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS THEREFORE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/ - SD/ - (B.P. JAIN) ( PARTHA SARATHI CHAUDHURY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30/11/2016 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) - 1 5. THE DR ASSISTANT REGISTRAR