M/S. S.K. JAIN INFRASTRUCTURE PVT. LTD., Bhopal V. THE DCIT 1(1), Bhopal

ITA 431/IND/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6107 (ITAT-INDORE)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 08-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Initiation of penalty proceedings
• Section: 234B; 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A.NOS.433 TO 435/IND/2015 A.Y. : 2009-10 TO 2011-12. M/S. S.K.JAIN, JT. CIT, BHOPAL. VS RANGE 1, BHOPAL APPELLANT RESPONDENT I.T.A.NOS.411 TO 413/IND/2015 A.Y. : 2009-10 TO 2011-12 DY. CIT, M/S. S.K.JAIN, 1(1), VS BHOPAL. BHOPAL APPELLANT RESPONDENT PAN NO. AAOFS1606A I.T.A.NOS.414/IND/2015 A.Y. : 2010-11. DY. CIT , 1(1), BHOPAL VS M/S.S.K.JAIN INFRASTRUCTURE PRIVATE LIMITED, BHOPAL DY. CIT VS. M/S. S.K.JAIN AND M/S. S.K.JAIN VS. JT. CIT, BHOPAL AND M/S. S.K.JAIN INFRASTRUCTURE P.LTD ., BHOPAL VS. DY. CIT, BHOPAL AND DY. CIT BHPAL VS. M/S. S.K. INFRASTRUCTURE P.LTD., BHOPAL I.T.A .NOS. 411 TO 413 AND 433 TO 435/IND/2015 AND I.T.A.NOS. 414 AND 431/IND/2015 AND 432/IND/2015 A.YS. 2009-10 TO 20 11-12 2 2 APPELLANT RESPONDENT PAN NO. AAMCS0932J I.T.A.NO. 431 & 432/IND/2015 A.Y. : 2010-11 AND 2011-12. M/S.S.K.JAIN INFRASTRUCTURE PRIVATE LIMITED, BHOPAL VS DY. CIT , 1(1), BHOPAL APPELLANT RESPONDENT DEPARTMENT BY : SHRI R.A. VERMA, DR ASSESSEE B Y : SHRI ASHISH GOYAL, CA AND SHRI N. D. PATWA, ADV O R D E R PER D.T.GARASIA, J.M. THESE CROSS APPEALS IN I.T.A.NOS. 433 TO 435/IND/20 15 FILED BY THE ASSESSEE AND APPEALS IN I.T.A.NOS. 411 TO 413/IND/2015 ARE FILED BY THE REVENUE AGAINST THE S EPARATE DATE OF HEARING : 17.05. 2016 DATE OF PRONOUNCEMENT : 17 . 05 .2016 DY. CIT VS. M/S. S.K.JAIN AND M/S. S.K.JAIN VS. JT. CIT, BHOPAL AND M/S. S.K.JAIN INFRASTRUCTURE P.LTD ., BHOPAL VS. DY. CIT, BHOPAL AND DY. CIT BHPAL VS. M/S. S.K. INFRASTRUCTURE P.LTD., BHOPAL I.T.A .NOS. 411 TO 413 AND 433 TO 435/IND/2015 AND I.T.A.NOS. 414 AND 431/IND/2015 AND 432/IND/2015 A.YS. 2009-10 TO 20 11-12 3 3 ORDERS OF CIT(A)-I, BHOPAL, ALL DATED 18.03.2015 RE LATING TO ASSESSMENT YEARS 2009-10 TO 2011-12. 2. CROSS APPEALS IN I.T.A.NOS. 414/IND/2015 AND 431/IND/2015 BY THE REVENUE AND ASSESSEE M/S. S.K. JAIN INFRASTRUCTURE PRIVATE LIMITED, BHOPAL, ARE DIRECTE D AGAINST THE ORDER OF CIT(A)-I, BHOPAL, DATED 17.03.2015 RELATIN G TO ASSESSMENT YEAR 2010-11. APPEAL IN I.T.A.NO. 432/IN D/2015 FILED BY M/S. S.K.JAIN INFRASTRUCTURES PRIVATE LIMI TED, BHOPAL IS DIRECTED AGAINST THE ORDER OF CIT(A)-I, BHOPAL, DATED 17.3.2015 FOR THE ASSESSMENT YEAR 2011-12. I.T.A.NOS. 433 TO 435/IND/2015 AND 411 TO 413/IND/2015 AND ASSESSEES APPEAL AND DEPARTMENTS APPEALS (A.Y.2009-10 TO 2011-12): 3. THE ASSESSEE HAS COME IN APPEALS AGAINST THE REVENUES APPEALS AND HAS TAKEN THE COMMON GROUNDS IN ALL THE APPEALS EXCEPT FIGURES. FOR THE SAKE OF BREVITY , WE ARE REPRODUCING THE GROUNDS TAKEN FOR THE ASSESSMENT YE AR 2009- 10 :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO OF INVOKING THE PROVISIONS OF SECTION 145 (3 ) DY. CIT VS. M/S. S.K.JAIN AND M/S. S.K.JAIN VS. JT. CIT, BHOPAL AND M/S. S.K.JAIN INFRASTRUCTURE P.LTD ., BHOPAL VS. DY. CIT, BHOPAL AND DY. CIT BHPAL VS. M/S. S.K. INFRASTRUCTURE P.LTD., BHOPAL I.T.A .NOS. 411 TO 413 AND 433 TO 435/IND/2015 AND I.T.A.NOS. 414 AND 431/IND/2015 AND 432/IND/2015 A.YS. 2009-10 TO 20 11-12 4 4 OF THE ACT BY REJECTING THE BOOKS OF ACCOUNT WITHOUT ACCEPTING THE EXPLANATION OFFERED BY THE APPELLANT AND WITHOUT CONSIDERING THE FACT THAT THE REGULAR AND PROPER BOOKS OF ACCOUNTS ARE MAINTAINED AND THE SAME ARE AUDITED U/S 44AB OF THE INCOME-TAX ACT. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITI ON OF RS. 15,79,747/- OUT OF TOTAL ADDITION OF RS. 1,04,40,771/- BY ESTIMATING THE NET PROFIT @ 6.5 % ON TOTAL CONTRACT RECEIPTS OF RS. 2,07,64,76,006/- WITHOUT CONSIDERING THE EXPLANATION OFFERED BY THE APPELLANT AND WITHOUT CONSIDERING THE FACT THAT IN THE IMMEDIATELY PRECEDING YEAR I.E. IN ASSESSMENT YEAR 2008-09 IN APPELLANTS OWN CASE, THE HON'BLE I.T.A.T. HAS ADOPTED THE NET PROFIT RATE @ 6.25 % A S REASONABLE AND FAIR. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED, CHARGING OF INTEREST U/ S 234B IS NOT JUSTIFIED. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN INITIATING PENALTY PROCEEDINGS U/S 271(1)(C), WHICH IS NOT JUSTIFIED. 4. THE REVENUE HAS TAKEN THE COMMON GROUND IN ALL THESE APPEALS, WHICH READ AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIA(A) HAS ERRED IN DIRECTING THE AO TO COMPUTE THE NET PROFIT AT 6.5 % AS AGAINST THE NET PROFIT RATE OF 8% AND 6% APPLIED BY THE AO ON THE WORK DONE BY THE ASSESSEE AND THE WORK DONE BY SUB-CONTRACTORS RESPECTIVELY. DY. CIT VS. M/S. S.K.JAIN AND M/S. S.K.JAIN VS. JT. CIT, BHOPAL AND M/S. S.K.JAIN INFRASTRUCTURE P.LTD ., BHOPAL VS. DY. CIT, BHOPAL AND DY. CIT BHPAL VS. M/S. S.K. INFRASTRUCTURE P.LTD., BHOPAL I.T.A .NOS. 411 TO 413 AND 433 TO 435/IND/2015 AND I.T.A.NOS. 414 AND 431/IND/2015 AND 432/IND/2015 A.YS. 2009-10 TO 20 11-12 5 5 5. WE ARE DECIDING FIRST ASSESSEES APPEALS FOR THE SA KE OF CONVENIENCE. 6. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE I S A FIRM WORKS AS A CIVIL CONTRACTOR DOING THE WORK OF I RRIGATION DEPARTMENT OF MADHYA PRADESH GOVERNMENT. REGULAR AN D PROPER BOOKS OF ACCOUNTS ARE MAINTAINED WHICH ARE AU DITED U/S 44AB OF THE INCOME-TAX ACT, 1961. DURING THE AS SESSMENT PROCEEDINGS, THE AO REJECTED THE BOOKS OF ACCOUNTS BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T AND MADE THE ASSESSMENT IN THE MANNER PROVIDED IN SECTION 14 4 OF THE ACT THOUGH THE ASSESSEE MAINTAINS REGULAR AND PROPE R BOOKS OF ACCOUNTS WHICH ARE AUDITED BY A CHARTERED ACCOUNT ANT U/S 44AB OF THE ACT AND THE AUDIT REPORT IN FORM NO.3CB AND 3CD WERE ATTACHED WITH THE RETURN OF INCOME FILED FOR THE YEAR. 7. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS SUBMITTED A CHART SHOWING THE DETAILS OF BUSINESS FR OM THE ASSESSMENT YEARS 2004-05 TO 2011-12, WHICH IS REPROD UCED AS UNDER :- DY. CIT VS. M/S. S.K.JAIN AND M/S. S.K.JAIN VS. JT. CIT, BHOPAL AND M/S. S.K.JAIN INFRASTRUCTURE P.LTD ., BHOPAL VS. DY. CIT, BHOPAL AND DY. CIT BHPAL VS. M/S. S.K. INFRASTRUCTURE P.LTD., BHOPAL I.T.A .NOS. 411 TO 413 AND 433 TO 435/IND/2015 AND I.T.A.NOS. 414 AND 431/IND/2015 AND 432/IND/2015 A.YS. 2009-10 TO 20 11-12 6 6 A.Y. OWN WORK SUB - CONTRACT WORK TOTAL CONTRACT NET PROFIT SHOWN BY THE ASSESSEE AGGREGATE PERCENTAGE OF PROFIT AS SHOWN BY THE ASSESSEE COMMERCIAL TAX REFUND CREDITED IN PROFIT AND LOSS ACCOUNT NET PROFIT EXCLUDING COMMERCIAL TAX REFUND AGGREGATE % OF PROFIT EXCLUDING COMMERCIAL TAX REFUND AGGREGATE PERCENTAGE OF PROFIT AS ADOPTED BY CIT(A) AGGREGATE PERCENTAGE OF PROFIT AS ADOPTED BY I.T.A.T. 2004 - 05 46,84,50,346 3,84,23,277 50,68 ,73,623 2,96,52,107 5.85% - 2,96,52,107 5.85 % 6% 6% 2005 - 06 44,77,88,489 31,02,85,467 75,80,73,956 2,56,98,707 3.39% - 2,56,98,707 3.39 % 6% 6% 2006 - 07 25,52,64,734 57,34,63,673 82,87,28,407 4,53,31,444 5.47% - 4,53,31,444 5.47 % 6% 6% 2007 - 08 65,81,00,967 78,37,04,892 144,18,05,859 9,29,96,478 6.45% - 9,29,96,478 6.45 % 6.5 % 6.5 % 2008 - 09 60,26,58,858 102,41,64,969 162 , 68,50,827 8,54,19,410 5.25% - 8,54,19,410 5.25% 5.75% 6.25% 2009 - 10 96,21,70,161 111,43,05,845 207,64,76,006 13,33,91,193 6.42 % - 13,33,91,193 6.42% 6.50% UNDER APPEAL 2010 - 11 110,47,92,505 80,50,65,679 190,98,58,184 13,91,74,629 7.29% 1,61,69, 9 36 12,30,04,333 6.44% 6.50% + COMMERCIAL TAX REFUND UNDER APPEAL 2011 - 12 113,25,07,576 73,34,69,757 186,59,77,333 13,95,70,190 7.48% 2,49,21,659 11,46,48,531 6.14 % 6.50% + COMMERCIAL TAX REFUND UNDER APPEAL 8. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT FROM THE ABOVE IT IS CLEAR THAT SINC E ASSESSMENT YEAR 2004-05 TO 2008-09, THE ASSESSEE HAS SHOWN THE DIFFERENT PROFIT AND CIT(A) HAS ALSO ADOPTED THE DIFFERENT NE T PROFIT RATE, BUT ULTIMATELY, THE PROFIT INCLUDING THE OWN CONTRAC T AND SUB- CONTRACT ON AGGREGATE BASIS AS ADOPTED BY THE I.T. A.T. AT 6%, 6% , 6% , 6.5 % AND 6.25 % FOR THE ASSESSMENT YEARS 2004-05 TO 2008-09 RESPECTIVELY. THE LD. AUTHORIZED REPRESE NTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT IN ASSESSMENT Y EAR 2004- 05, 2005-06 & 2006-07 WHEN I.T.A.T. HAS TAKEN THE NE T PROFIT RATIO AT 6%, WHEN THE MOST OF THE WORK WAS BEING DONE BY THE ASSESSEE OF ITS OWN. ONLY SOME PART OF THE WORK WAS G IVEN ON SUB CONTRACT BASIS. IN ASSESSMENT YEAR 2007-08 AND 2008-09, A MAJOR PORTION OF THE WORK WAS GIVEN ON SUB CONTRACT BASIS. THE I.T.A.T. HAS ADOPTED THE AGGREGATE NET PROFIT R ATIO IN THE TOTAL WORK @ 6.5% IN ASSESSMENT YEAR 2007-08 AND 6.2 5% IN DY. CIT VS. M/S. S.K.JAIN AND M/S. S.K.JAIN VS. JT. CIT, BHOPAL AND M/S. S.K.JAIN INFRASTRUCTURE P.LTD ., BHOPAL VS. DY. CIT, BHOPAL AND DY. CIT BHPAL VS. M/S. S.K. INFRASTRUCTURE P.LTD., BHOPAL I.T.A .NOS. 411 TO 413 AND 433 TO 435/IND/2015 AND I.T.A.NOS. 414 AND 431/IND/2015 AND 432/IND/2015 A.YS. 2009-10 TO 20 11-12 7 7 ASSESSMENT YEAR 2008-09. THE LD. AUTHORIZED REPRESE NTATIVE FOR THE ASSESSEE FURTHER CONTENDED THAT FROM THE AB OVE, IT IS CLEAR THAT IN THE ASSESSMENT YEAR 2008-09, THE I.T. A.T. HAS ADOPTED THE NET PROFIT RATE @ 6.25% WHILE THE ASSESS EE ITSELF HAS SHOWN THE NET PROFIT @ 6.14% BEFORE ADDING THE COMMERCIAL TAX REFUND. BUT EVEN THEN, THE LD. CIT(A ) HAS ADOPTED THE NET PROFIT RATE @ 6.50 % AND MADE THE ADDITION OF RS. 15,79,747/-, RS. 11,36,450/- AND RS. 68,79,994 /- RESPECTIVELY FOR THE ASSESSMENT YEARS 2009-10, 2010 -11 & 2011-12. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS ALSO PLACED THE ORDERS OF THE I.T.A.T. IN THE A SSESSEES OWN CASE , WHICH ARE PLACED IN THE PAPER BOOK FROM PAGES 1 25. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PRAYED THAT THE REASONABLE PROFIT RATE MAY PLEASE BE ALLOWED. 9. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON TH E ORDERS OF THE LOWER AUTHORITIES 10. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE HAVE ALSO GONE THROUGH THE ORDERS OF TH E AUTHORITIES BELOW AS WELL AS ORDERS PASSED BY THE I .T.A.T. FOR ASSESSMENT YEARS 2004-05 TO 2008-09. LOOKING TO THE FACTS DY. CIT VS. M/S. S.K.JAIN AND M/S. S.K.JAIN VS. JT. CIT, BHOPAL AND M/S. S.K.JAIN INFRASTRUCTURE P.LTD ., BHOPAL VS. DY. CIT, BHOPAL AND DY. CIT BHPAL VS. M/S. S.K. INFRASTRUCTURE P.LTD., BHOPAL I.T.A .NOS. 411 TO 413 AND 433 TO 435/IND/2015 AND I.T.A.NOS. 414 AND 431/IND/2015 AND 432/IND/2015 A.YS. 2009-10 TO 20 11-12 8 8 AND CIRCUMSTANCES OF THE CASE, IT WOULD MEET THE END S OF JUSTICE IF THE AGGREGATE PROFIT PERCENTAGE IS TAKEN AT 6.45 % FOR THE ASSESSMENT YEAR 2009-10 AND 2010-11 ON THE TOTA L CONTRACT RECEIPTS. WE ESTIMATE THE AGGREGATE PROFIT RATE FOR THE ASSESSMENT YEAR 2011-12 AT 6.20 % ON THE TOTAL CONT RACT RECEIPTS. THE COMMERCIAL TAX REFUND SHALL BE ASSES SED SEPARATELY FOR THE ASSESSMENT YEARS 2010-11 AND 201 1-12. WE DIRECT ACCORDINGLY. 11. IN THE RESULT, THE ASSESSEES APPEALS ARE PARTLY AL LOWED AND DEPARTMENTAL APPEALS ARE DISMISSED. I.T.A.NOS. 431 & 414/IND/2015 ASSESSEES APPEAL A ND REVENUES APPEAL : (M/S. S.K.JAIN INFRASTRUCTURER P RIVATE LIMITED ): A.Y. : 2010-11 12. THE ASSESSEE AND REVENUE HAVE COME IN CROSS APPEAL AGAINST THE ORDER OF LD. CIT(A)-I, BHOPAL, DATED 17 .03.2015, FOR THE ASSESSMENT YEAR 2010-11. 13. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIA(A) ERRED, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO OF INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT BY REJECTIN G DY. CIT VS. M/S. S.K.JAIN AND M/S. S.K.JAIN VS. JT. CIT, BHOPAL AND M/S. S.K.JAIN INFRASTRUCTURE P.LTD ., BHOPAL VS. DY. CIT, BHOPAL AND DY. CIT BHPAL VS. M/S. S.K. INFRASTRUCTURE P.LTD., BHOPAL I.T.A .NOS. 411 TO 413 AND 433 TO 435/IND/2015 AND I.T.A.NOS. 414 AND 431/IND/2015 AND 432/IND/2015 A.YS. 2009-10 TO 20 11-12 9 9 THE BOOKS OF ACCOUNT WITHOUT ACCEPTING THE EXPLANATION OFFERED BY THE APPELLANT AND WITHOUT CONSIDERING THE FACT THAT THE REGULAR AND PROPER BOOKS OF ACCOUNTS ARE MAINTAINED AND THE SAME ARE AUDITED U/S 44AB OF THE INCOME-TAX ACT. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIA(A) ERRED, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 26,11,476/- OUT OF TOTAL ADDITION OF RS. 52,70,973/-BY ESTIMATING THE NET PROFIT @ 6.5 % INSTEAD OF 6.05% AS SHOWN BY THE APPEAL WITHOUT CONSIDERING THE EXPLANATION OFFERED BY THE APPELLANT AND WITHOUT CONSIDERING THE FACT THAT IN THE IMMEDIATELY PRECEDING YEAR I.E. ASSESSMENT YEAR 2009-10, THE ASSESSEE HAS SHOWN THE PROFIT RATE @ 5.78 % AND THE SAME WAS ACCEPTED IN THE ASSESSMENT ALSO. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIA(A) ERRED, CHARGING OF INTEREST U/ S 234A AND U/S 234B IS NOT JUSTIFIED. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIA(A) ERRED, INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) IS NOT JUSTIFIED. 14. THE REVENUE HAS TAKEN THE FOLLOWING GROUND OF APPEAL :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIA(A) ERRED, THE LD. CIT(A) HAS ERRED IN D IRECTING THE AO TO COMPUTE THE NET PROFIT AT 6.5 % AS AGAINS T THE NET PROFIT RATE OF 8% AND 6% APPLIED BY THE AO ON T HE DY. CIT VS. M/S. S.K.JAIN AND M/S. S.K.JAIN VS. JT. CIT, BHOPAL AND M/S. S.K.JAIN INFRASTRUCTURE P.LTD ., BHOPAL VS. DY. CIT, BHOPAL AND DY. CIT BHPAL VS. M/S. S.K. INFRASTRUCTURE P.LTD., BHOPAL I.T.A .NOS. 411 TO 413 AND 433 TO 435/IND/2015 AND I.T.A.NOS. 414 AND 431/IND/2015 AND 432/IND/2015 A.YS. 2009-10 TO 20 11-12 10 10 WORK DONE BY THE ASSESSEE AND THE WORK DONE BY SUB- CONTRACTORS RESPECTIVELY. 15. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PRIVATE LIMITED COMPANY INCORPORATED ON 04.12.2007 VIDE REGISTRATION NO. U45201MP2007PTC020069 WITH THE REGI STRAR OF COMPANIES, GWALIOR AND ASSESSED TO TAX SINCE ITS INCEPTION. THE ASSESSEE COMPANY STARTED WORK FIRST TIME IN AY. 2009-10. REGULAR AND PROPER BOOKS OF ACCOUNT ARE MAINTAINED WHICH ARE AUDITED U/S 44AB OF THE ACT AS WELL AS UNDER THE COMPANIES ACT. THE ASSESSEE IS MAINLY DOING THE CON STRUCTION WORK OF DAMS AND CANALS ALLOTTED BY THE MADHYA PRADE SH GOVERNMENT. FOR THE YEAR UNDER CONSIDERATION, THE A SSESSEE HAS FILED THE RETURN SHOWING INCOME OF RS 4,51,80,53 8/- AND THE ASSESSMENT FOR THE SAME WAS COMPLETED AT AN INCO ME OF RS.5,02,98,084/- BY MAKING ADDITION OF RS. 51,17,54 4/-. IN THE ASSESSMENT, THE AO HAS REJECTED THE BOOKS OF AC COUNT BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE IN COME TAX ACT AND MADE THE ASSESSMENT IN THE MANNER PROVIDED IN S ECTION 144 OF THE ACT THOUGH THE ASSESSEE COMPANY MAINTAIN S REGULAR AND PROPER BOOKS OF ACCOUNT WHICH ARE AUDITE D BY A DY. CIT VS. M/S. S.K.JAIN AND M/S. S.K.JAIN VS. JT. CIT, BHOPAL AND M/S. S.K.JAIN INFRASTRUCTURE P.LTD ., BHOPAL VS. DY. CIT, BHOPAL AND DY. CIT BHPAL VS. M/S. S.K. INFRASTRUCTURE P.LTD., BHOPAL I.T.A .NOS. 411 TO 413 AND 433 TO 435/IND/2015 AND I.T.A.NOS. 414 AND 431/IND/2015 AND 432/IND/2015 A.YS. 2009-10 TO 20 11-12 11 11 CHARTERED ACCOUNTANT U/S 44AB OF THE ACT. THE AUDIT ORS HAVE NOT POINTED OUT ANY MISTAKE IN THE BOOKS OF ACCOUNT S OR BILL AND VOUCHERS AS MAINTAINED BY THE ASSESSEE. THE AUD IT REPORT IN FORM NO. 3CA AND 3CD WERE ATTACHED WITH THE RETUR N OF INCOME FILED FOR THE YEAR. THE ASSESSEE COMPANY IS AN IRRIGATION CONTRACTOR AND FOR THE YEAR UNDER CONSID ERATION HAS SHOWN TOTAL CONTRACT RECEIPTS OF RS.75,57,04,045/- WH ICH INCLUDES THE OWN WORK OF RS.24,77,92,123/- AND WORK GI VEN ON SUB-CONTRACT BASIS OF RS.50,79,11,922/- AND HAS SHOWN THE NET PROFIT OF RS. 4,51,80,540/- WHICH IS NEARLY 5.98% OF THE TOTAL WORK DONE. IN THE ASSESSMENT, THE AD HAS S EGREGATED THE NET PROFIT BY INVOKING THE PROVISION U/S 145 (3 ) AND HAS ESTIMATED THE PROFIT AT RS.5,02,98,084/- BY ESTIMAT ING THE NET PROFIT @ 8 % ON WORK DONE BY THE ASSESSEE AND ESTIMA TED THE NET PROFIT @ 6 % ON WORK EXECUTED BY THE SUB-CONTRAC TOR AS UNDER :- ESTIMATING THE NET PROFIT @8% ON WORK DONE BY THE ASSESSEE ITSELF OF RS. 24,77,92,123/- RS. 1,98,23,369/- ESTIMATING THE NET PROFIT @ 6% ON WORK DONE BY THE SUB CONTRACTOR OF RS. 50,79,11,922/- RS. 3,04,74,715/- TOTAL NET PROFIT AS ESTIMATED BY THE AO RS. 5,02,9 8,084/- LESS : NET PROFIT AS SHOWN BY THE ASSESSEE RS. 4,5 1,80,540/- ADDITION IN ASSESSMENT RS. 51,17,544/- DY. CIT VS. M/S. S.K.JAIN AND M/S. S.K.JAIN VS. JT. CIT, BHOPAL AND M/S. S.K.JAIN INFRASTRUCTURE P.LTD ., BHOPAL VS. DY. CIT, BHOPAL AND DY. CIT BHPAL VS. M/S. S.K. INFRASTRUCTURE P.LTD., BHOPAL I.T.A .NOS. 411 TO 413 AND 433 TO 435/IND/2015 AND I.T.A.NOS. 414 AND 431/IND/2015 AND 432/IND/2015 A.YS. 2009-10 TO 20 11-12 12 12 THUS, AS PER THE ABOVE CALCULATION, THE AVERAGE NET PROFIT COMES TO 6.65 % INSTEAD OF 5.98 % AS SHOWN BY THE AS SESSEE AND DIFFERENCE OF RS.51,17,544/- IS ADDED IN THE AS SESSMENT. IT IS SUBMITTED THAT BEFORE ADOPTING THE PROFIT @ 8 % ON WORK DONE BY THE ASSESSEE AND @ 6% ON THE WORK DONE BY TH E SUB CONTRACT, THE AO HAS NOT APPRECIATED THE FACT THAT THE ASSESSEE HAS ADOPTED THE NET PROFIT RATIO OF 8% ON OWN CONTRA CT AND 5 % ON SUBCONTRACT. LIKEWISE ON TOTAL CONTRACT, THE AS SESSEE HAS SHOWN THE AGGREGATE NET PROFIT @ 5.98% THIS YEAR, TH OUGH IN THE IMMEDIATELY PRECEDING YEAR, IT WAS 6.05%. THERE WAS VERY SLIGHT DECREASE IN THE AGGREGATE NET PROFIT RATIO F ROM 6.05% TO 5.98% WHICH IS DUE TO REASON THAT THE TURNOVER OF TH E ASSESSEE IS INCREASED SUBSTANTIALLY. IT IS A BASIC LAW THAT I F THE TURNOVER IS INCREASE, PROFIT IS REDUCED. THIS IS CLEAR FROM THE FOLLOWING CHART. AY TURNOVER SUB PERCENTAGE OWN WORK PERCENTAGE NE T PERCENTAGE OF PROFIT CONTRACT TO TURNOVER DONE TO TURNOVER PROFIT ON TOTAL ON OWN ON SUB CONTRACT CONTRACT CONTRACT 09-10 21,84,20,967 12,52,67,564 57.35% 9,31,53,403 42.65% 1,26,16,571 5.78% 8% 3.33% 10-11 57,89,61,995 30,12,46,627 52% 27,77,15,368 48% 3,50,21,054 6.05% 8% 4.25/~ 11-12 75,57,04,045 50,79,11,922 67% 24,77,92,123 33% 4,51,80,540 5.98% 8% 5% DY. CIT VS. M/S. S.K.JAIN AND M/S. S.K.JAIN VS. JT. CIT, BHOPAL AND M/S. S.K.JAIN INFRASTRUCTURE P.LTD ., BHOPAL VS. DY. CIT, BHOPAL AND DY. CIT BHPAL VS. M/S. S.K. INFRASTRUCTURE P.LTD., BHOPAL I.T.A .NOS. 411 TO 413 AND 433 TO 435/IND/2015 AND I.T.A.NOS. 414 AND 431/IND/2015 AND 432/IND/2015 A.YS. 2009-10 TO 20 11-12 13 13 IN THIS YEAR THE ASSESSEE ITSELF HAS SHOWN THE PROFI T @ 8% ON OWN CONTRACT AND @ 5% ON SUB-CONTRACT BASIS AND THE AGGREGATE PERCENTAGE OF THE PROFIT AS SHOWN BY THE A SSESSEE COMES TO 5.98% WHICH IS VERY REASONABLE AND FAIR IN THIS LINE OF BUSINESS. FURTHER, IN A.Y. 2009-10, THE AO IN TH E ASSESSMENT HAS ACCEPTED THE INCOME SHOWN BY THE ASSE SSEE @ 8% ON OWN CONTRACT AND @ 3.38% ON WORK GIVEN ON SUB- CONTRACT BASIS AGGREGATING TO OVERALL NET PROFIT PE RCENTAGE @ 5.78%. BUT THIS YEAR THE LEARNED CIT (APPEALS) HAS ADOPTED THE NET PROFIT RATE @ 6.50% INSTEAD OF 5.98% AS SHO WN BY THE ASSESSEE AND THEREBY SUSTAINED THE ADDITION OF RS.3 9,40,223/- AND HENCE, THIS APPEAL. 16. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE REASONABLE RATE OF NET PROFIT MA Y BE ALLOWED. 17. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON TH E ORDER OF LOWER AUTHORITIES. DY. CIT VS. M/S. S.K.JAIN AND M/S. S.K.JAIN VS. JT. CIT, BHOPAL AND M/S. S.K.JAIN INFRASTRUCTURE P.LTD ., BHOPAL VS. DY. CIT, BHOPAL AND DY. CIT BHPAL VS. M/S. S.K. INFRASTRUCTURE P.LTD., BHOPAL I.T.A .NOS. 411 TO 413 AND 433 TO 435/IND/2015 AND I.T.A.NOS. 414 AND 431/IND/2015 AND 432/IND/2015 A.YS. 2009-10 TO 20 11-12 14 14 18. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, IT WOULD MEET THE ENDS OF JUSTICE, IF AGGREGATE PROFIT PERCENTAGE IS TAKEN AT 6.20 % ON THE TOTAL CONTRACT RECEIPTS. I.T.A.NO. 432/IND/2015 ASSESSEES APPEAL : M/S. S .K.JAIN INFRASTRUCTURES PVT.LTD. A.Y. 2011-12 : 19. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL : - 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIA(A) ERRED, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO OF INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT BY REJECTIN G THE BOOKS OF ACCOUNT WITHOUT ACCEPTING THE EXPLANATION OFFERED BY THE APPELLANT AND WITHOUT CONSIDERING THE FACT THAT THE REGULAR AND PROPER BOOKS OF ACCOUNTS ARE MAINTAINED AND THE SAME ARE AUDITED U/S 44AB OF THE INCOME-TAX ACT. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIA(A) ERRED, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 39,40,223/- OUT OF TOTAL ADDITION OF RS. 51,17,544/- BY ESTIMATING THE NET PROFIT @ 6.5 % INSTEAD OF 5.98 % AS SHOWN BY THE APPEAL WITHOUT CONSIDERING THE EXPLANATION OFFERED BY THE APPELLANT AND WITHOUT CONSIDERING THE FACT THAT IN THE ASSESSMENT YEAR 2009-10, THE ASSESSEE HAS SHOWN THE PROFIT RATE @ 5.78 % AND THE SAME WAS ACCEPTED IN THE ASSESSMENT ALSO. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIA(A) ERRED, CHARGING OF INTEREST U/ S 234A AND U/S 234B IS NOT JUSTIFIED. DY. CIT VS. M/S. S.K.JAIN AND M/S. S.K.JAIN VS. JT. CIT, BHOPAL AND M/S. S.K.JAIN INFRASTRUCTURE P.LTD ., BHOPAL VS. DY. CIT, BHOPAL AND DY. CIT BHPAL VS. M/S. S.K. INFRASTRUCTURE P.LTD., BHOPAL I.T.A .NOS. 411 TO 413 AND 433 TO 435/IND/2015 AND I.T.A.NOS. 414 AND 431/IND/2015 AND 432/IND/2015 A.YS. 2009-10 TO 20 11-12 15 15 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIA(A) ERRED, INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) IS NOT JUSTIFIED. 20. THE FACTS OF THE CASE ARE SIMILAR TO ASSESSMENT YEA R 2010-11. 21. WE ESTIMATE THE NET PROFIT RATE AT 6.15% ON TOTAL CONTRACT RECEIPTS. WE DIRECT ACCORDINGLY. 22. OTHER GROUNDS TAKEN BY THE ASSESSEE IN ALL THE ABO VE APPEALS IN BOTH THE ASSESSEES REGARDING INTEREST U/ S 234 AND 234B ARE OF CONSEQUENTIAL NATURE, HENCE THEY DO NOT REQUIRE ANY ADJUDICATION. SIMILARLY, THE PENALTY U/S 271(1) (C) WILL NOT BE IMPOSED, AS THESE CASES RELATE TO ESTIMATION OF PROFIT. 23. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 24. CONSEQUENTLY, ALL THE APPEALS OF THE ASSESSEES ARE PARTLY ALLOWED AND DEPARTMENTAL APPEALS ARE DISMISS ED. DY. CIT VS. M/S. S.K.JAIN AND M/S. S.K.JAIN VS. JT. CIT, BHOPAL AND M/S. S.K.JAIN INFRASTRUCTURE P.LTD ., BHOPAL VS. DY. CIT, BHOPAL AND DY. CIT BHPAL VS. M/S. S.K. INFRASTRUCTURE P.LTD., BHOPAL I.T.A .NOS. 411 TO 413 AND 433 TO 435/IND/2015 AND I.T.A.NOS. 414 AND 431/IND/2015 AND 432/IND/2015 A.YS. 2009-10 TO 20 11-12 16 16 THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 17 TH MAY, 2016. SD/- (B.C.MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 17 TH MAY, 2016. CPU*