DCIT, BHARATPUR V. GANGADHAR AGARWAL, BHARATPUR

ITA 456/JPR/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99346 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 01-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA
• Assessee Lawyers: P C PARWAL CA DHK
• Keywords: Reasonable cause

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 456/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 THE DCIT CIRCLE- BHARATPUR BHARATPUR CUKE VS. SHRI GANGADHAR AGARWAL PROP.: M/S. GANGADHAR AGARWAL CONTRACTOR, AGRASEN COLONY, BEHIND NEW SABJI MANDI, BAYANA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: ABEPA 91400 VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA, JCIT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL , CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 06/10/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 09/10/2015 VKNS'K@ ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), KOTA DATED 20-02-2013 FOR THE ASSESSMENT YE AR 2007-08 CHALLENGING THE DELETION OF ADDITION OF RS. 9,52,48 7/- BY THE LD. CIT(A) BY HOLDING THAT THE BOOKS OF ACCOUNT CANNOT BE REJE CTED WITHOUT POINTING OUT ANY SPECIFIC DEFECTS. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A CIVIL CONTRACTOR. THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE AUDITED U/S 44 AB OF THE ACT. THE ITA NO. 456/JP/2013 THE DCIT,CIRCLE- BHARATPUR VS. SHRI GANGADHAR AGARW AL 2 RETURN OF INCOME WAS FILED DECLARING INCOME AT RS. 18,92,750/-. THE ASSESSEE'S COMPARATIVE TRADING RESULTS ARE AS UNDER :- A.Y. GROSS RECEIPTS GROSS PROFIT GROSS PROFIT RATE NET PROFIT NET PROFIT RATE 2005-06 15651953 957244 6.12% 184877 1.18% 2006-07 10821219 964333 8.91% 557276 5.15% 2007-08 37328001 3429377 9.18% 1890236 5.064% THE AO WAS OF THE VIEW THAT THE ASSESSEE HAD SHOWN LESSER PROFIT IN TERMS OF NET PROFIT RATE I.E. FROM 5.15% TO 5.064%. BESID ES, IT WAS OBSERVED THAT THE ASSESSEE WAS NOT MAINTAINING DAY TODAY SITE-WIS E STOCK REGISTER AND CONSEQUENTLY THE AO REJECTED THE BOOKS OF ACCOUNT A ND ESTIMATED THE NET PROFIT RATE AT 8%. 2.2 AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL WHEREIN THE LD. CIT(A) WAS OF THE VIEW THAT THE ASSESSEE HAS MAINTA INED PROPER BOOKS OF ACCOUNT AND NO SPECIFIC DEFECTS WERE POINTED OUT BY THE AO. THEREFORE, REJECTION OF BOOKS OF ACCOUNT WAS NOT CALLED FOR AN D ADDITION WAS DELETED. 2.3 AGGRIEVED, REVENUE IS BEFORE US. 2.4 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED AS UNDER:- 1. THE ASSESSEE'S MAINTAINED ALL THE REGULAR ACCOUNT B OOKS I.E. CASH BOOK, LEDGER, BANK ACCOUNT ETC WHICH ARE DULY AUDIT ED U/S 44AB OF THE I.T.ACT. THE ACCOUNT BOOKS WERE PRODUCED BEFORE AO AND NO SPECIFIC DEFECTS HAVE BEEN FOUND THEREIN. THE AO HA S REJECTED THE ACCOUNT BOOKS ARBITRARILY FOR NON-MAINTENANCE OF S ITE WISE STOCK REGISTER WHICH IS POSSIBLE CONSIDERING THE NATURE O F ROAD WORK CONTRACT BEING ON VARIOUS DISTANT POINTS. THE PROCE SS OF ITA NO. 456/JP/2013 THE DCIT,CIRCLE- BHARATPUR VS. SHRI GANGADHAR AGARW AL 3 CONSTRUCTION IS SUCH THAT NO STANDARD FORMULA CAN B E DRAWN. THERE IS NO ACCOUNTING STANDARD OR METHOD PRESCRIBED BY G OVT. OR INSTITUTE OF CHARTERED ACCOUNTANTS. 2. BESIDES IT IS WELL SETTLED THAT ONLY ON THE GROUND OF STOCK REGISTER, BOOKS OF ACCOUNTS CANNOT BE REJECTED WHICH HAS BEEN UPHELD BY FOLLOWING JUDICIAL CITATIONS: THE CALCUTTA HIGH COURT IN THE CASE OF ASHOKA REFAC TORIES (P) LTD. VS. CIT (2005) 199 CTR (CAL.) 115:, (2005) 279 ITR 457 (CAL), THE PUNJAB HIGH COURT IN THE CASE OF PANDIT BROS VS. CIT (1954), 26 ITR 159 (PUNJ) AND THE KERALA HIGH COURT OF S. VEERIAH REDDIAR VS. CIT (196) 38 ITR 152 (KER.) HELD, MEREL Y ON THE GROUND OF STOCK REGISTER , BOOKS OF ACCOUNTS CANNOT BE REJECTED. 3. THE GAUHATI HIGH COURT CATEGORICALLY HELD IN THE CA SE OF PYARELAL MITTAL VS. ASSTT. CIT (2007) 211 CTR (GAU.) 512: ( 2007) 291 ITR 214 (GAU.), OBSERVED THAT ASSESSING OFFICER HAVI NG NOT FOUND ANY FAULT WITH THE BOOKS OF ACCOUNT AND METHOD OF A CCOUNTING EMPLOYED BY THE ASSESSEE OR DISCOVERED SUPPRESSION OF ANY MATERIAL FACT, NO ADDITION COULD BE MADE TO THE INC OME OF THE ASSESSEE BY ESTIMATING PROFIT AS A PERCENTAGE OF TU RNOVER. 4. ITAT JODHPUR BENCH JODHPUR IN THE CASE OF CIT VS. J AS JACK ELEGANCE EXPORTS 324 ITR 95 (DEL.). IT IS FURTHER S UBMITTED THAT NON-MAINTENANCE OF DAY TODAY REGISTER DOES NOT IMPA CT THE VALIDITY OF BOOKS OF ACCOUNT. ITAT IN THE CASE OF AJANTA CON STRUCTION (P) LTD. REPORTED IN XXI TW 606 (ITAT), JAIPUR HAS HELD THAT THE MAINTENANCE OF BOOKS OF ACCOUNT IN NORMAL COURSE OF BUSINESS ACTIVITIES HAVE TO BE TAKEN AS CORRECT UNLESS THERE ARE STRONG AND SUFFICIENT REASONS TO INDICATE THAT THEY ARE UNRELI ABLE. THE AFORESAID VIEW IS ALSO SUPPORTED BY THE SUPREME COURT DECISIO N IN THE CASE OF CIT VS. HCL COMMENT SYSTEMS & SERVICES LTD. 5. THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF U TTAM CHUNA PATHAR UDYOG VS. ITO 192 ITR 56 (RAJ.) HELD THAT MI NOR DEFECTS SHOULD NOT LEAD TO REJECTION OF BOOKS OF ACCOUNT. I T IS FURTHER SUBMITTED THAT SINCE THE AUDIT REPORT WAS PREPARED U/S 44AB, THEREFORE, THE AO SHOULD NOT HAVE REJECTED THE EXPL ANATION OF THE ASSESSEE. FURTHER RELIANCE IS PLACED ON CIT VS. JAI ENGINEERING WORKS LTD. 113 ITR 389 (DEL.). ITA NO. 456/JP/2013 THE DCIT,CIRCLE- BHARATPUR VS. SHRI GANGADHAR AGARW AL 4 6. THE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED IN REGULA R COURSE OF BUSINESS AND AS SUCH ADMISSIBLE U/S 34 OF THE EVIDE NCE ACT. IT IS SUBMITTED THAT THE SELF MADE VOUCHERS ARE ADMISSIBL E AS PROOF OF PAYMENT BY ACCOUNTING STANDARDS. IN VARIOUS EXIGENC IES MATERIAL IS TO BE PURCHASED AT THE SITE FOR WHICH BILLS ARE NOT PROVIDED BY THE SMALL TRADERS. THE AO HAS NOT POINTED OUT THAT THE SELF MADE VOUCHERS WERE BOGUS OR UN-GENUINE. THE AUDITOR HAS NOT COMMENTED ANYTHING ADVERSE ON THE SELF MADE VOUCHER S. THE ASSESSEE IS A REGULAR TAX PAYER AND SHOWING CLOSING STOCK ON ESTIMATED BASIS AND CLOSING STOCK OF PREVIOUS YEAR WILL BE OPENING STOCK OF NEXT YEAR. CONSEQUENTLY ANY VARIATION IN S TOCK VALUATION IS REVENUE NEUTRAL. THEREFORE, THIS CANNOT BE TAKEN AS A REASONABLE CAUSE FOR REJECTION OF THE BOOKS OF ACCOUNTS, THUS LD. AO WAS NOT JUSTIFIED IN REJECTING THE ACCOUNTS BOOKS U/S 145(3 ) OF THE I.T. ACT. 2.5 THE LD. COUNSEL FURTHER CONTENDS THAT THE AO HA S HIMSELF ADMITTED THAT ASSESSEE TURNOVER HAS INCREASED AND GROSS PRO FIT ALSO INCREASED FROM 8.91% TO 9.18%. HOWEVER, ANY HOW THE ADDITION WAS MADE BY THE AO FOR MINOR DIFFERENCE OF 0.086% IN NET PROFIT, BY A LAME REASON THAT THE ASSESSEE IS NOT MAINTAINING DAY TODAY SITE WISE STO CK REGISTER. FOR CONSTRUCTION OF ROADS, NO STOCK REGISTER IS POSSIBL E AS THE SAME IS OF ONLY BITUMEN AND BAJRI. THUS THE AO HAS NEITHER MENTIONE D ANY SPECIFIC DEFECTS NOR GAVE PROPER YARDSTICKS TO ESTIMATE THE INCOME. A MINOR DIFFERENCE OF 0.86% CANNOT BE A REASON TO HOLD THAT ASSESSEES INCOME WAS LIABLE FOR ESTIMATION. 2.6 THE LD. DR SUPPORTED THE ORDER OF THE AO. 2.7 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN OUR VIEW, THE ASSESSEE'S IN COME IN TERMS OF GROSS ITA NO. 456/JP/2013 THE DCIT,CIRCLE- BHARATPUR VS. SHRI GANGADHAR AGARW AL 5 PROFIT RATE IS BETTER THAN EARLIER YEARS AND IN TER MS OF NET PROFIT RATE ALSO, IT IS FAIRLY COMPARABLE. THE NP DIFFERENCE IS VERY MIN OR AT 0.086% WHICH CANNOT AFFECT THE INCOME. BESIDES, THE LD. CIT(A) H AS RIGHTLY OBSERVED THAT THE AO HAS FAILED TO POINT OUT ANY SPECIFIC DE FECT IN THE BOOKS OF ACCOUNT. IN VIEW THEREOF FOREGOING, WE HAVE NO HESI TATION TO UPHOLD THE ORDER OF THE LD. CIT(A). THUS THE APPEAL OF THE REV ENUE IS DISMISSED. 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 -1 0-2015 SD/- SD/- FOE FLAG ;KNO VKJ-IH-RKSYKUH (VIKRAM SINGH YADAV) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 09/10/ 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE DCIT, CIRCLE-,BHARATPUR 2. IZR;FKHZ@ THE RESPONDENT- SHRI GANGADHAR AGARWAL, BHARATP UR 3. VK;DJ VK;QDRVIHY ) @ CIT(A) 4. VK;DJ VK;QDR@ CIT 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.456/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR