DCIT, Chandigarh V. M/s B.L. Mehta Construction Pvt. Ltd., Chandigarh

ITA 455/CHANDI/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5090 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-11-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 27-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAVI SARANGA L
• Keywords: Rejection of books of accounts; Loose papers; Corroborative evidences; Condonation of delay
• Section: 40A(3); 133A; 153A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACOCUNTANT MEMBER ITA NO. 282/CHD/2015 ASSESSMENT YEARS: 2010-11 M/S B.L. MEHTA CONSTRUCTION PVT. LTD, VS. THE DCIT, CENTRAL CIRCLE 1, CHANDIGARH CHANDIGARH PAN NO. AACCB5332P ITA NO. 454/CHD/2015 ASSESSMENT YEARS: 2010-11 THE DCIT, CENTRAL CIRCLE-1, VS. M/S B.L. MEHTA CONS TRUCTION PVT. LTD, CHANDIGARH CHANDIGARH PAN NO. AACCB5332P ITA NO. 455/CHD/2015 ASSESSMENT YEARS: 2011-12 THE DCIT, CENTRAL CIRCLE-1, VS. M/S B.L. MEHTA CONS TRUCTION PVT. LTD, CHANDIGARH CHANDIGARH PAN NO. AACCB5332P & C.O. NO.15/CHD/2015 (IN ITA NO. 455/CHD/2015) ASSESSMENT YEARS: 2011-12 M/S B.L. MEHTA CONSTRUCTION PVT. LTD, VS. THE DCIT, CENTRAL CIRCLE 1, CHANDIGARH CHANDIGARH PAN NO. AACCB5332P (APPELLANT) (RESPONDENT) APPELLANT BY : SH. T.N. SINGLA RESPONDENT BY : SH. RAVI SARANGAL DATE OF HEARING : 23.03.2017 DATE OF PRONOUNCEMENT : 19.06.2017 2 ORDER PER ANNAPURNA GUPTA, AM THE ABOVE APPEALS RELATE TO SAME ASSESSEE AND PERT AIN TO ASSESSMENT YEARS 2010-11 AND 2011-12. THE APPEALS IN ITA NOS. 282/CH D/2015 AND 454/CHD/2015 ARE CROSS APPEALS BY THE ASSESSEE AND DEPARTMENT AG AINST THE ORDER OF THE CIT(A) DATED 09-02-15 PASSED FOR ASSESSMENT YEAR 20 10-11 WHILE ITA NO. 455/CHD/2015 IS APPEAL OF THE REVENUE AGAINST THE O RDER OF LD. CIT(A) DATED 09-02-15 PASSED FOR ASSESSMENT YEAR 2011-12 IN WHIC H THE ASSESSEE HAS FILED CROSS OBJECTIONS IN C.O. NO. 15/CHD/2015. 2. AT THE OUTSET IT MAY BE POINTED OUT THAT BOTH TH E APPEALS FILED BY THE REVENUE WERE TIME BARRED BY 10 DAYS. AN APPLICATION FOR CONDONATION OF DELAY WAS FILED BEFORE US DATED 21.3.2017, WHICH STATES A S UNDER:- 2. IN THIS REGARD, IT IS KINDLY SUBMITTED THAT THE DELAY OF TEN DAYS IN FILING THE APPEAL IN THE ABOVE CITED CASE OCCURRED SINCE THIS OFFICE HAD TO CALL F OR FORM NO. 35 FROM THE OFFICE OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL)(CENTRAL), GURGAON IN THE SAID APPEALS. THE OFFICE BEING AT GURGAON IS AT A DISTANCE AND HENCE IT TOOK TIME TO ARRANGE FOR COPIES OF FORM NO. 35. THESE FORMS ARE REQUIRED TO BE ATTACHED WITH THE APPEALS TO BE FILED BEFORE THE HON'BLE ITAT. ALSO, THIS OFFICE HAD TO GO THE PHOTOCOPYING OF THE CONCERNED DOCUMENTS INCLUDING ASSESSMENT ORDER, CIT(A)'S ORDER IN SIX COPIES EACH TO BE ATTACHED WITH THE APPEALS FROM THE OUTSIDE SOURCES WHICH HAD TO BE ARRANGED AT SHORT NOTICE SINCE AT THE TIME THE PHOTOCOPIER MACHINE OF THE OFFICE WAS NOT 3 FUNCTIONAL. 3. IN VIEW OF THE ABOVE FACTS & CIRCUMSTANCES, IT IS REQUESTED THAT THE GRANT OF CONDONATION FOR DELA Y OF TEN DAYS IN FILING THE ABOVE SAID APPEAL BEFORE THE HON'BLE ITAT MAY KINDLY BE GRANTED. THE LD. COUNSEL FOR THE ASSESSEE DID NOT OBJECT TO THE SAME. SINCE WE FIND THAT THERE WAS BONAFIDE REASON FOR THE DELAY OF 10 DAYS IN FILING THE APPEAL BY THE REVENUE, WE ACCORDINGLY CONDONE THE SAME. 3. WE SHALL NOW PROCEED TO ADJUDICATE THE APPEALS. IT WAS COMMON GROUND BETWEEN BOTH THE PARTIES THAT THE ISSUE INVOLVED IN ALL THE APPEALS WAS COMMON AND IDENTICAL AND, THEREFORE, THEY WERE HEARD TOGET HER AND ARE BEING DISPOSED OFF BY WAY OF A COMMON AND CONSOLIDATED ORDER. FOR THE SAKE OF CONVENIENCE, WE SHALL DEAL WITH THE CROSS APPEAL OF THE ASSESSEE A ND DEPARTMENT PERTAINING TO ASSESSMENT YEAR 2010-11. ITA NO. 282/CHD/2015 AND 454/CHD/2015:- 4. THE FACTS RELATING TO THE CASE ARE THAT SEARCH U /S 132(1) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') WAS CONDUCTED ON MEH TA & ZANDER GROUP OF CASES ON 18.2.2011 BY THE INVESTIGATION WING OF INCOME TA X, CHANDIGARH. THE ASSESSEE M/S B.L. MEHTA CONSTRUCTION PVT. LTD WAS O NE OF THE PERSONS COVERED IN THE SEARCH. NOTICE U/S 153A OF THE ACT WAS ISSUE D TO THE ASSESSEE, IN RESPONSE TO WHICH RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 4,03,74,110 WAS FILED BY THE ASSESSEE ON 08.02.2013. THEREAFTER NOTICE U/ S 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE AND ASSESSMENT PROCEEDINGS I NITIATED, DURING THE COURSE OF WHICH THE ASSESSING OFFICER FOUND THAT DURING SEARC H OPERATION, THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NEITHER FOUND AT ITS B USINESS OR RESIDENTIAL PREMISES. THE COMPLETE BOOKS OF ACCOUNT WERE ALSO N OT PRODUCED BY THE ASSESSEE 4 POST-SEARCH OPERATIONS. THE CPU WAS HOWEVER IMPOUND ED BUT THE SAME WAS FOUND ALTERED. IN THIS BACKDROP THE ASSESSING OFFIC ER HELD THAT THE BOOKS WERE INCOMPLETE AND UNRELIABLE AND CITING INSTANCES OF S EIZURE OF CRUCIAL DOCUMENTS, NON MAINTENANCE OF STOCK REGISTER AND QUANTITATIVE AND QUALITATIVE DETAIL OF STOCK APART FROM NON RECORDING OF EXPENDITURE PROPE RLY IN THE BOOKS OF ACCOUNT, HE REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE U /S 145(3) OF THE ACT AND ESTIMATED PROFITS EARNED BY APPLYING NET PROFIT RA TE OF 7% AS AGAINST 5.93% RETURNED BY THE ASSESSEE. THUS AN ADDITION OF RS. 70,24,327/- WAS MADE TO THE INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD . CIT(A) WHO UPHELD THE REJECTION OF BOOKS BUT REDUCED THE NET PROFIT RATE APPLIED TO 6.5%, THUS PARTLY ALLOWING THE ASSESSEES APPEAL. 5. AGGRIEVED BY THE SAME, BOTH THE ASSESSEE AND REV ENUE HAVE COME UP IN APPEAL BEFORE US. THE ASSESSEE CHALLENGED THE REJEC TION OF BOOKS OF ACCOUNT AND THE APPLICATION OF NET PROFIT RATE OF 6.5% FOR ESTI MATING THE PROFIT EARNED BY THE ASSESSEE AS ALSO NOT ALLOWING SET OFF OF SURRENDER ED INCOME OF RS. 265 LACS AGAINST THE ADDITION MADE ON ESTIMATED BASIS. THE REVENUE, ON THE OTHER HAND, CHALLENGED THE REDUCTION OF NET PROFIT RATE FOR EST IMATING THE PROFIT OF THE ASSESSEE FROM 7% TO 6.5% BY THE LD. CIT(A). 6. WE SHALL FIRST BE TAKING UP THE APPEAL FILED B Y THE ASSESSEE IN ITA NO. 282/CHD/2015. GROUND NO.1 RAISED BY THE ASSESSEE READS AS UNDER: - 1. THAT THE ORDER OF LD. PRINCIPAL CIT (OSD) IS BAD, A GAINST THE FACTS AND LAW. THE ABOVE GROUND BEING GENERAL IN NATURE NEEDS NO A DJUDICATION. 5 7. GROUND NO.2 RAISED BY THE ASSESSEE IS AGAINST T HE ESTIMATION OF PROFITS @6.5% WHILE GROUND NO.3 CHALLENGES THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT. SINCE THE REJECTION OF BOOKS OF ACCOUNTS PRECEDES THE ESTIMATION OF PROFITS, WE SHALL BE TAKING UP GROUND NO.3 FIRST. GROUND NO.3 OF THE APPEAL READS AS UNDER:- 3. THAT THE LD. PRINCIPAL CIT (OSD) HAS WRONGLY UPHELD THE REJECTION OF REGULAR OF BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. 8. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY CON TESTED THE REJECTION OF BOOKS OF ACCOUNT AND STATED THAT THE FINDINGS OF TH E LD. CIT(A), THAT ASSESSEE HAD FAILED TO MAINTAIN OR RETAIN THE BOOKS OF ACCOU NT AND OTHER DOCUMENTS TO ENABLE DETERMINATION OF THE TOTAL INCOME OF THE ASS ESSEE, WAS FALSE. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT COMPLETE BOOKS OF ACCOUNT SUPPORTED BY VOUCHERS WERE MAINTAINED BY THE ASSESSEE WHICH IS E VIDENT FROM THE REPORT OF THE STATUTORY AUDITORS TO THE BALANCE SHEET FOR THE IMPUGNED ASSESSMENT YEAR WHEREIN THEY HAVE CATEGORICALLY STATED THAT PROPER BOOKS OF ACCOUNT AS REQUIRED BY LAW HAVE BEEN KEPT BY THE COMPANY. LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE AUDITORS REPORT MAKING THE AFORES AID OBSERVATIONS PLACED AT PAPER BOOK PAGE NO.1. THE LD. COUNSEL FOR THE ASSES SEE STATED THAT EVEN THE TAX AUDITORS REPORT CATEGORICALLY MENTIONED THAT NECES SARY BOOKS OF ACCOUNT WERE MAINTAINED AND EXAMINED BY THEM, WHICH INCLUDE THE CASH BOOK, LEDGER, STOCK RECORD, BANK BOOK, AT HEAD OFFICE AND BRANCHES AT C HANDIGARH AND NEW DELHI. LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO PAPER BOOK PAGE NO.5 IN THIS REGARD WHICH WAS THE TAX AUDIT REPORT. LD. COUNSEL ALSO POINTED OUT TO THE FACT THAT THESE FACTS WERE BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS VIDE LETTER DATED 28.2.2013 . FURTHER, LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT PENALTY LEVIED FOR NO N MAINTENANCE OF BOOKS OF ACCOUNT U/S 271A IN THE CASE OF THE ASSESSEE FOR AL L OF THE SEARCH YEARS WAS 6 DELETED BY THE LD. CIT(A) VIDE HIS ORDER DATED 7.8 .2015, WHEREIN HE CATEGORICALLY HELD THAT HE DISAGREED WITH THE OBSER VATION OF THE ASSESSING OFFICER THAT REGULAR BOOKS OF ACCOUNT WERE NOT MA INTAINED IN THE CASE OF THE ASSESSEE. LD. COUNSEL FOR THE ASSESSEE DREW OUR AT TENTION TO THE RELEVANT PARAS OF THE ORDER OF CIT(A) STATING SO PLACED AT PAPER B OOK PAGE NO.35. THE LD. COUNSEL ALSO DREW OUR ATTENTION TO THE ORDER SHEET ENTRIES MADE FOR THE IMPUGNED ASSESSMENT YEAR AND POINTED OUT THAT THE ASSESSING OFFICER HAD NOTED IN THE ORDER SHEET ENTRY DATED 22.2.2013 THAT HE HAD OBSER VED THAT BOOKS OF ACCOUNT OF THE ASSESSEE WERE FOUND AND SEIZED FROM HIS RESIDEN CE. THE RELEVANT NOTING IN THE ORDER SHEET PLACED AT PAPER BOOK PAGE NO. 41 RE ADS AS UNDER:- SHRI T.N. SINGLA, CA AR OF THE ASSESSEE ATTENDED A ND FILED PART REPLY WRITTEN REPLY TO THE QUESTIONNAIRE DATED 16.01.2013. HE WAS ASKED TO FILE THE AUDITED BALANCE SHEET & P&C ACCOUNT ALONG WITH ITS ANNEXURES. ALSO, HE WAS ASKED TO SHOW CAUSE THAT SINCE THE BOOKS OF ACCOUNT OF M/S B.L. MEHTA CONSTRUCTION PVT LTD FOUND AND SEIZED FROM ASSESSEE S RESIDENCE AND BUSINESS PREMISES WERE INCOMPLETE BOOKS OF ACCOUNT AND WERE NOT BEING REGULARLY WRITT EN AND WERE LACKING IN TERMS OF SUPPORTING EVIDENCES / BILLS VOUCHERS / ON VARIOUS ACCOUNTS AND ASSESSEE H AS FAILED TO PRODUCE HIS BOOKS EVEN AFTER THE SEARCH BEFORE THE DDIT(INV), CHANDIGARH, SO WHY THE SAME SUBMITTED NOW DURING THE ASSESSMENT PROCEEDINGS SHOULD NOT BE REJECTED AND AN ESTIMATION OF PROFITS BE MADE FOR THE CONTRACTOR BUSINESS. CASE FIXED FOR 08.03.2013 TO RELY TO THE ABOVE SHOW CAUSE. 9. THE LD. COUNSEL FOR THE ASSESSEE ALSO POINTED OU T THAT EVEN THE ORDER OF THE ASSESSING OFFICER WAS CONTRARY IN THIS REGARD. THE LD. COUNSEL STATED THAT WHILE IN PARA 5, THE ASSESSING OFFICER STATED THAT NO BOOKS OF ACCOUNT WERE FOUND DURING THE COURSE OF SEARCH, WHEREAS IN PARA 6 THE ASSESSING OFFICER STATES 7 THAT COMPLETE BOOKS OF ACCOUNT WERE NOT PRODUCED BEFORE DDIT (INV.) EVEN AFTER SEARCH. THE LD. COUNSEL POINTED OUT THAT IT I S NOT CLEAR AS TO WHAT EXACTLY WAS THE CHARGE AGAINST THE ASSESSEE, WHETHER OF NON MAINTENANCE THE BOOKS OF ACCOUNT OR MAINTAINING INCOMPLETE BOOKS. THE LD. CO UNSEL FOR THE ASSESSEE STATED THAT EVIDENTLY THE CHARGE CANNOT BE OF NON M AINTENANCE OF BOOKS OF ACCOUNT, IN VIEW OF HIS SUBMISSIONS MADE ABOVE. FUR THER, LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT IF NO BOOKS OF ACCOUNT WE RE MAINTAINED BY THE ASSESSEE, HOW THE ASSESSING OFFICER POINTED OUT DIS CREPANCIES IN THE SAME IN THE ASSESSMENT ORDER. AS FOR INCOMPLETE BOOKS OF ACCOU NT MAINTAINED, LD. COUNSEL STATED THAT NOWHERE IN THE ASSESSMENT ORDER OR EVEN IN THE CIT(A)S ORDER, IT WAS COMING OUT CLEARLY AS TO HOW THE BOOKS OF ACCOUNTS PRODUCED WERE INCOMPLETE SINCE THE SAME HAS NOT BEEN SPECIFIED EITHER BY THE ASSESSING OFFICER OR BY THE CIT(A).VIS-A-VIS DISCREPANCIES NOTED IN THE BOOKS OF ACCOUNT, LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE SUBMISSIONS MADE BEFORE THE CIT(A) IN THIS REGARD REPRODUCED AT PAGES 10 TO 12 OF THE CIT (A) ORDER AND STATED THAT ALL THE SO CALLED DISCREPANCIES WERE DULY EXPLAINED AND CLARIFIED. THE LD. COUNSEL THUS STATED THAT THERE WAS NO REASON AT ALL TO REJE CT THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 10. THE LD. DR ON THE OTHER HAND, RELIED ON THE ORD ER OF CIT(A) AND STATED THAT SINCE THE BOOKS OF ACCOUNT WERE NOT FOUND DURI NG THE SEARCH OR EVEN PRODUCED BY THE ASSESSEE POST-SEARCH, THEREFORE, T HE LD. CIT(A) HAD RIGHTLY HELD THAT THE ASSESSEE FAILED TO MAINTAIN OR RETAIN THE BOOKS OF ACCOUNT AND THUS HAD RIGHTLY UPHELD THE REJECTION OF BOOKS OF ACCOUN T U/S 145(3) OF THE ACT. LD DR ALSO DREW OUR ATTENTION TO THE DEFICIENCIES POIN TED OUT BY THE AO IN THE BOOKS OF ACCOUNTS WHICH JUSTIFIED THEIR REJECTION. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF THE AUTHORITIES BELOW, AS ALSO THE DOCUMENTS TO WHICH O UR ATTENTION WAS DRAWN. THE 8 FIRST FACT WHICH EMERGES FROM THE ABOVE DISCUSSION AND THE DOCUMENTS PRODUCED BEFORE US, IS THAT DURING THE COURSE OF SEARCH, BOO KS OF ACCOUNT WERE FOUND AT THE ASSESSEE PREMISES. THE ORDER U/S 133A OF THE AC T IMPOUNDING THE BOOKS OF ACCOUNT LISTS ALONGWITH CERTAIN LOOSE PAPERS, A C. D. AND IN THE IMPOUNDING ORDER U/S 133(1) PLACED AT PAPER BOOK PAGE NO.38 BE FORE US, IT HAS BEEN STATED THAT CPU CONTAINING THE BOOKS OF ACCOUNT WAS IMPOUN DED. AS PER THE OBSERVATIONS OF THE AO AT PARA 5 OF HIS ORDER, THE SAID CPU WAS OPERATED UPON AND FOUND TO BE ALTERED AND THE FILES WERE NOT READ ABLE AND WHEN THE ASSESSEE WAS CONFRONTED WITH THE SAME AT THE TIME OF RECORDI NG STATEMENT U/S 132(4), NO REPLY WAS FURNISHED BY THE ASSESSEE. THESE FACTS HA VE NOT BEEN REBUTTED BY THE LD.COUNSEL FOR THE ASSESSEE. THUS, VIRTUALLY, NO BO OKS WERE FOUND TO BE MAINTAINED BY THE ASSESSEE DURING THE COURSE OF SEA RCH. BUT IT APPEARS FROM THE ORDER SHEET NOTING MADE ON 22-02-13, AS REPRODUCED ABOVE, THAT ANOTHER SET OF BOOKS OF ACCOUNTS WERE PRODUCED BY THE ASSESSEE WHI CH THE AO EXPRESSED HIS INTENTION TO REJECT, IN THE BACKDROP OF THE FACT TH AT THE BOOKS OF ACCOUNT FOUND DURING SEARCH WERE INCOMPLETE .THE RELEVANT ORDER S HEET ENTRY IS BEING REPRODUCED TO HIGHLIGHT THIS FACT: SHRI T.N. SINGLA, CA AR OF THE ASSESSEE ATTENDED A ND FILED PART REPLY WRITTEN REPLY TO THE QUESTIONNAIRE DATED 16.01.2013. HE WAS ASKED TO FILE THE AUDITED BALANCE SHEET & P&C ACCOUNT ALONG WITH ITS ANNEXURES. ALSO, HE WAS ASKED TO SHOW CAUSE THAT SINCE THE BOOKS OF ACCOUNT OF M/S B.L. MEHTA CONSTRUCTION PVT LTD FOUND AND SEIZED FROM ASSESSEE S RESIDENCE AND BUSINESS PREMISES WERE INCOMPLETE BOOKS OF ACCOUNT AND WERE NOT BEING REGULARLY WRITT EN AND WERE LACKING IN TERMS OF SUPPORTING EVIDENCES / BILLS VOUCHERS / ON VARIOUS ACCOUNTS AND ASSESSEE H AS FAILED TO PRODUCE HIS BOOKS EVEN AFTER THE SEARCH BEFORE THE DDIT(INV), CHANDIGARH, SO WHY THE SAME SUBMITTED NOW DURING THE ASSESSMENT PROCEEDINGS 9 SHOULD NOT BE REJECTED AND AN ESTIMATION OF PROFITS BE MADE FOR THE CONTRACTOR BUSINESS. CASE FIXED FOR 08.03.2013 TO RELY TO THE ABOVE SHOW CAUSE. (EMPHASIS SUPPLIED BY US) THE FINDING OF THE LD.CIT(A) IN HIS ORDER DT.18-08 -15 DELETING PENALTY LEVIED U/S 271A, WHICH IS FOR FAILING TO KEEP AND MAINTAI N ANY BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS REQUIRED U/S 44A OF THE ACT, FUR THER CORROBORATES THIS FACT. THE LD.CIT(A) HAS CATEGORICALLY HELD IN THE SAID OR DER THAT HE DISAGREED WITH THE AO THAT REGULAR BOOKS OF ACCOUNTS WERE NOT MAIN TAINED BY THE ASSESSEE. ON PERUSAL OF THE ORDER OF THE LD. CIT(A), WE FIND THA T THE LD.CIT(A) HAD OBSERVED THAT THE ASSESSEE HAD CONTENDED THAT IT HAD MAINTAI NED PROPER BOOKS OF ACCOUNT AND PRODUCED THE SAME DURING ASSESSMENT PROCEEDINGS AND THIS CONTENTION OF THE ASSESSEE HAD NOT BEEN REBUTTED BY THE ASSESSING OFF ICER. THE LD. CIT(A),WE FIND, FURTHER NOTED THAT THE ASSESSING OFFICER HAD OBSERVED THAT THERE WERE INCOMPLETE ENTRIES IN THE BOOKS MAINTAINED, STOCK R EGISTER WERE NOT MAINTAINED, PURCHASE VOUCHERS WERE ABSENT AND EXPENSES WERE NOT PROPERLY RECORDED IN THE BOOKS. THE LD. CIT(A) HELD THAT THE SAID OBSERVATIO NS PERTAINED TO REGULAR BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND DIS CREPANCY NOTED THEREIN WERE THE REASONS FOR REJECTING THE BOOKS. ON THIS BASIS, THE LD. CIT(A) HELD THAT IT COULD NOT BE STATED THAT REGULAR BOOKS OF ACCOUNT W ERE NOT MAINTAINED BY THE ASSESSEE. THIS FACT IS FURTHER CORROBORATED BY THE REPORT OF THE STATUTORY AUDITORS AND THE TAX AUDITORS OF THE COMPANY AS POINTED OUT BEFORE US WHO HAVE CATEGORICALLY MENTIONED THAT REGULAR BOOKS OF ACCOUNTS WERE MAINTAINED BY THE ASSESSEE. IN THE ABOVE CIRCUMSTANCES OF THE CAS E, WE ARE UNABLE TO AGREE WITH FINDING OF THE LD. CIT(A) THAT THE ASSESSEE FAIL ED TO MAINTAIN OR RETAIN THE BOOKS OF ACCOUNT 10 FURTHER, EVEN THE DISCREPANCIES POINTED OUT IN THE BOOKS OF ACCOUNT, WE FIND, HAVE BEEN ADEQUATELY ADDRESSED BY THE ASSESSEE IN H IS SUBMISSIONS BEFORE THE LD.CIT(A) AS UNDER:- 3.1. INCOMPLETE ENTRIES IN THE REGULAR BOOKS OF ACCOUNTS BEING MAINTAINED BY THE ASSESSEE CONCERN:- THE LEARNED ASSESSING OFFICER HAS OBJECTED THAT THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF PAYMENT MADE FOR TH E TRANSFER OF PROPERTY SCO 273, SECTOR 32D, CHANDIGAR H. IN THIS REGARD, WE WOULD LIKE TO SUBMIT THAT THE ASSES SEE HAS DULY EXPLAINED THE SOURCES OF THE PAYMENT FOR THE P URCHASE OF THE ABOVE SAID PROPERTY TO THE SATISFACTION OF THE LEARNED ASSESSING OFFICER, THAT IS WHY THERE IS NO SEPARATE ADDITION U/S 68/69 FOR THE INVESTMENT IN THE PROPERTY SO ALL EGED. YOUR ATTENTION IS FURTHER INVITED TO THE FACT THAT INVES TMENT IN THE SAID PROPERTY WAS MADE ON 23.10.2008 RELEVANT TO AY 2009- 10 WHICH IS NOT DURING THE YEAR UNDER CONSIDERATION AS SUCH THE SAME CANNOT BE A BASIS FOR REJECTION OF BOOKS F OR THE AY 2007-08. 2. NON - MAINTENANCE OF STOCK REGISTER & FULL QUAL ITATIVE AND QUANTATIVE TALLY:- AO HAS ALLEGED THAT DAY TO DAY STOCKS REGISTER WITH QUANTITATIVE AND QUALITATIVE DETAILS WERE NOT AVAIL ABLE. YOUR ATTENTION IS INVITED TO THE FACT THAT ASSESSEE IS H AVING DIFFERENT CONTRACT SITES OPERATIVE DURING THE YEARS AND CONTRACT SITE WISE PAYMENT DETAILS IS ATTACHED AT P AGE 119. THAT CONSTRUCTION SITE IS USUALLY MANAGED THROUGH M UNSHI AND IT IS NOT POSSIBLE TO MAINTAIN STOCK REGISTER F OR EACH ITEM AT CONSTRUCTION SITE. THE MATERIAL PURCHASED I NCLUDES STEEL, CEMENT, BRICKS, SAND, BAJRI, GATKA AND OTHER CONSUMABLE. THAT AS PER THE NORMS LAID OUT BY MILIT ARY ENGINEERING SERVICES FOR WHOM ASSESSEE IS EXECUTING CONSTRUCTION CONTRACTS STOCK DETAILS FOR CEMENT AND STEEL ARE MAINTAINED AS PER CONTRACT NORMS AND THE SAME ARE A LSO MAINTAINED BY MES AUTHORITIES TO RELEASE SECURED AD VANCE 11 AND PASS THE BILLS. HOWEVER, IT IS NOT POSSIBLE TO MAINTAIN DAY TO DAY CONSUMPTION OF LARGE NUMBER OF CONSUMABLES USED IN THE CONSTRUCTION LINE. AS STOCK OF SAND, BAZRI, DIFFERENT SIZES OF GRAVELS, ELECTRICAL GOODS, PLUMBING GOODS, INVOLVES A LARGE NUMBER OF ITEMS AN D IT IS NOT POSSIBLE TO MAINTAIN CONSUMPTION OF EVERY ITEM. THE FACT WAS EXPLAINED TO AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE COMPLETE DETAILS OF QUANTITY CONSU MED ARE AVAILABLE IN THE BOOKS OF ACCOUNT WHICH IS ALWAYS A VAILABLE FOR EXAMINATION AND ANALYSIS. THE METHOD OF VALUATION OF STOCK WAS ALSO DESCRIBED VIA WRITTEN REPLY DURING THE ASSESSMENT PROCEEDINGS. ASSESSEE COMPANY HAS MAINTAINED THE BEST PRACTICE A S VOUCHER OF EVERY EXPENDITURE INCLUDING CONSUMABLES IS OBTAINED AND INVENTORY AT THE END OF THE YEAR AND T HE SAME IS ADOPTED IN THE BOOKS OF ACCOUNTS AS CLOSING STOCK O F THE RESPECTIVE YEAR. THE ACCOUNTS OF THE COMPANY WERE AUDITED FROM A CHA RTERED ACCOUNTANT AS PER THE REQUIREMENT OF THE COMPANIES ACT AND INCOME TAX ACT. NO MAJOR DISCREPANCY IS EVER FOUND IN THE REGULAR BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSE E COMPANY. FURTHER AT THE END OF EVERY YEAR WE PHYSIC ALLY TAKE STOCK OF EACH AND EVERY ITEM AT THE SITE AND VALUE THESE ITEMS AT COST OR REALIZABLE VALUE, WHICHEVER IS LOWER. AL L PURCHASE & SALES ARE SUPPORTED BY BILLS AND VOUCHERS AND IF THE STOCK REGISTER CANNOT BE MAINTAINED DUE TO PRACTICAL POIN T OF VIEW, IT CANNOT FORM THE BASIS OF REJECTION OF BOOKS OF A CCOUNT. WE ALSO PLACE OUR RELIANCE ON THE JUDGMENT OF HON'B LE JURISDICTIONAL HIGH COURT PANDIT BROS VS CIT 26 ITR 159 (P&H) WHICH DEARLY STATES THAT 'THE FACT THAT THE PROFIT S APPEARED TO BE TOW OR THAT NO STOCK REGISTER WAS MA INTAINED WOULD NOT BE SUFFICIENT MATERIAL TO REJECT THE BOOK S OF ACCOUNTS', (COPY ENCLOSED AT PAGE 121-126JSIMILARIY IN THE CASE OF ASHOKE REFRACTORIES P LTD VS. CIT 279 ITR 457 12 (CAL) (COPY ENCLOSED AT PAGE 127-134) A SIMILAR VIEW IS TAKEN BY CALCUTTA HIGH COURT. 3. EXPENDITURE INCURRED/INVESTMENT NOT PROPERLY REC ORDED IN THE BOOKS OF ACCOUNTS: THE LEARNED ASSESSING OFFICER HAS OBJECTED THAT THE ASSESSEE CONCERN HAS MADE PAYMENTS OF SALARIES & WAGES AND O F OTHER EXPENSES IN CASH CO VARIOUS PERSONS AND THERE ARE PURCHASES/ INVESTMENTS WHICH HAVE NOT BEEN PROPERLY RECORDED IN BOOKS OF ACCOUNTS. AS FAR WAS AS PAYMENT OF WAGES IS CONCERNED THE PAY MENT TO THE LABOUR IS MADE IN CASH BUT THE SAME WITHIN THE LIMITS U/S 40A(3). IN REFERENCE TO PURCHASE/ INVESTMENTS NOT P ROPERLY RECORDED WITHOUT ANY SPECIFIC REFERENCE IS A VAGUE STATEMENT AND CAN NOT BE COMMENTED AND RELIED. THE KIND ATTEN TION OF YOUR HONOR IS FURTHER INVITED TO THE FACT THAT IT I S A SETTLED PRINCIPLE OF LAW 'ONE CANNOT BE CONDEMNED UNHEARD' WHICH IN PRESENT CASE MEANS THAT UNLESS PURCHASES / INVES TMENTS WHICH HAVE NOT BEEN RECORDED IN THE BOOKS OF ACCOUN TS ARE CONFRONTED TO THE ASSESSEE, NO ADVERSE INFERENCE CA N BE TAKEN. THE SIMILAR VIEW WAS EXPRESSED IN THE CASE O F CIT VS. EASTERN COMMERCIAL ENTERPRISES 210 ITR 103 (CAL) WH EREIN IT WAS HELD 'NO ADVERSE INFERENCE CAN BE DRAWN AGAI NST A PARTY UNLESS THAT PARTY IS PUT ON NOTICE OF THE CASE MADE AGAINST HIM.' IT IS EVIDENT FROM THE ABOVE THAT VIS-A-VIS THE INC OMPLETE ENTRIES IN THE BOOKS OF ACCOUNTS, THE ASSESSEE POINTED OUT THAT THE SAME WA S OBSERVED ON ACCOUNT OF A TRANSFER OF PROPERTY TO THE ASSESSEE, THE SOURCE OF WHICH WAS NOT DULY EXPLAINED. THE ASSESSEE HAD EXPLAINED THAT THE SAME DID NOT PERTAIN TO THE IMPUGNED YEAR BUT TO THE ASSESSMENT YEAR 2009-10 AN D THUS COULD NOT BE THE BASIS OF HOLDING THAT THE ENTRIES IN THE BOOKS OF A CCOUNT OF THE ASSESSEE WERE INCOMPLETE. THE REVENUE HAS NOT CONTROVERTED THESE FACTS. THUS WE DO NOT FIND 13 ANY MERIT IN THE CHARGE AGAINST THE ASSESSEE OF INC OMPLETE ENTRIES IN THE BOOKS OF ACCOUNTS. AS FOR NON MAINTENANCE OF STOCK REGISTER AND QUANTI TATIVE AND QUALITATIVE TALLY, THE ASSESSEE WE FIND HAD ADEQUATELY EXPLAINED THE I MPRACTICABILITY OF MAINTAINING DAY TO DAY RECORD OF THE MATERIAL CONS UMED BY THE ASSESSEE, BEING IN THE CONSTRUCTION LINE USING MATERIAL SUCH AS BRI CKS, SAND, BAJRI, CEMENT ETC. THE ASSESSEE HAD ALSO EXPLAINED THE METHOD OF VALUA TION ADOPTED BY IT BY STATING THAT THE STOCK WAS PHYSICALLY TAKEN AT THE END OF T HE YEAR AND VALUED AT THE COST OF REALIZABLE VALUE. EVEN THE LD CIT(A), WE FIND, HAS APPRECIATED THE IMPRACTICABILITY OF MAINTAINING STOCK REGISTER AND QUANTITATIVE AND QUALITATIVE TALLY OF EACH AND EVERY ITEM OF RAW MATERIAL, BUT A T THE SAME TIME, HELD THAT IT SHOULD HAVE SOME CONTROL MECHANSM OVER PURCHASE AND CONSUMPTION OF AT LEAST THE MAJOR ITEMS AND THUS SHOULD HAVE MAINTAINED STO CK REGISTER FAILING WHICH THE BOOKS WERE INCOMPLETE AND LIABLE TO BE REJECTED. WE ARE UNABLE TO AGREE WITH THIS CONTENTION OF THE LD. CIT(A) SINCE IN A NUMBER OF DECISIONS IT HAS BEEN HELD THAT NON MAINTENANCE OF STOCK REGISTER WOULD NOT BE SUFFICIENT MATERIAL TO REJECT THE BOOKS OF ACCOUNT, MORE SPECIFICALLY THE DECISIO N OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PANDIT BROTHERS VS. CIT 261 ITR 159 (P&H) 12. AS FOR THE DISCREPANCY PERTAINING TO EXPENDITUR E INCURRED OR INVESTMENT NOT PROPERLY RECORDED IN THE BOOKS OF ACCOUNT, THE OBSERVATION OF THE ASSESSING OFFICER WAS THAT CERTAIN SALARY AND WAGES HAD BEEN PAID IN CASH AND PURCHASES HAD NOT BEEN PROPERLY RECORDED. IN RESPONSE,THE ASS ESSEE HAS POINTED OUT THAT NO SPECIFIC REFERENCE HAS BEEN MADE AND THE ALLEGATION OF THE ASSESSING OFFICER WAS MERELY A VAGUE STATEMENT. FURTHER, THE ASSESSEE HA S CONTENDED THAT THE PAYMENT OF WAGES IN CASH WAS WITHIN THE PERMISSIBLE LIMITS PRESCRIBED U/S 40A(3) OF THE ACT. WE ARE IN AGREEMENT WITH THE CONTENTION OF THE ASSESSEE IN THIS REGARD. THE ALLEGATION AND THE CHARGE OF THE ASSESSING OFFICER OF NOT PROPERLY RECORDING PURCHASES OR INVESTMENTS OR EXPENSES IN THE BOOKS I S A VAGUE STATEMENT AND NO 14 SPECIFIC INSTANCE HAS BEEN POINTED OUT AT ANY STAGE . IN VIEW OF THE SAME, WE HOLD THAT THERE IS NO BASIS TO THE ALLEGATION LEVELED BY THE ASSESSING OFFICER IN THIS REGARD. AS IS EVIDENT FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE IS MAINTAINING REGULAR BOOKS OF ACCOUNT AND THERE IS NO DISCREPANCY IN THE SAME SO AS TO WARRANT REJECTION U/S 145(3) OF THE ACT. IN VIEW OF THE SAM E, WE SET ASIDE THE ORDER OF THE LD. CIT(A) REJECTING THE BOOKS OF ACCOUNT OF TH E ASSESSEE. GROUND NO.3 OF THE ASSESSEES APPEAL, THEREFORE, STANDS DISMISSED. 13. SINCE WE HAVE SET ASIDE THE REJECTION OF BOOKS OF ACCOUNT, OTHER GROUNDS RAISED BY THE ASSESSEE VIS-A-VIS THE ESTIMATION OF NET PROFIT AND THE TELESCOPING OF THE ADDITION MADE ON ACCOUNT OF SAME AGAINST THE SURRENDER MADE BY THE ASSESSEE NEEDS NO ADJUDICATION, SINCE THE ESTIMATIO N OF NET PROFITS WAS CONSEQUENTIAL TO THE REJECTION OF BOOKS OF ACCOUNTS . IN VIEW OF THE SAME, THE APPEAL OF THE STANDS ALLOW ED AND APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. ITA NO. 455/CHD/2015 & C.O. NO. 15/CHD/2015 14. SINCE THE ISSUE RAISED IN THE APPEAL BY THE REV ENUE AND CROSS OBJECTION BY THE ASSESSEE ARE IDENTICAL TO THAT WERE RAISED I N THE ASSESSEES APPEAL AND REVENUES CROSS APPEAL IN ITA NO. 282/CHD/2015 AND 454/CHD/2015 RESPECTIVELY, AS ALSO THE SUBMISSIONS OF BOTH THE P ARTIES BEING SIMILAR ON IDENTICAL ISSUES RAISED, THE DECISION RENDERED ABOV E IN THE CASE OF ASSESSEE AND REVENUE IN ITA NOS. 282/CHD/2015 AND IN ITA NO. 455 /CHD/2015 ABOVE WILL APPLY MUTATIS MUTANDIS TO THESE APPEALS ALSO. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE I N ITA NO. 282/CHD/2015 AND 15 CROSS OBJECTION OF THE ASSESSEE IN C.O. NO. 15/CHD/ 2015 ARE ALLOWED WHEREAS THE APPEALS OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.06.2017 SD/-` SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19.06.2017 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR