M/s Jugendra Singh and Co., Etah V. Dy. C.I.T., Circle-3(2), Etah

ITA 47/AGR/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67453 (ITAT-AGRA)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 08-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 47/AGRA/2013 ASSTT. YEAR : 2006-07 M/S. JUGENDRA SINGH & CO., VS. DY. C.I.T., CIRCLE 3(1), SURESH PURI, G.T. ROAD, ETAH. ETAH. (PAN : AABFS 1331 R) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJENDRA SHARMA, ADVOCATE RESPONDENT BY : SHRI K.K. MISHRA, JR. D.R. DATE OF HEARING : 22.08.2013 DATE OF PRONOUNCEMENT OF ORDER : 27.08.2013 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A), GHAZIABAD DATED 27.11.2012 FOR THE ASSESSMENT YEAR 2006-07, CHALLENGING THE REJECTION OF BOOKS OF ACCOUNT AND COMPUTATION OF IN COME BY APPLYING NET PROFIT RATE OF 3.75%. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A FIRM AND DECLARED TOTAL INCOME OF RS.2,20,40,160/-. THE ASSESSEE IS A CONTR ACTOR EXECUTING CONTRACT WORKS OF GOVERNMENT DEPARTMENT. THE ASSESSEE HAS SHOWN TO TAL GROSS RECEIPTS OF RS.76,77,50,969/- FROM THE CONTRACT WORK AND NET PR OFIT OF RS.2,20,40,160/-, WHICH ITA NO. 47/AGRA/2013 2 IS APPROXIMATELY 2.90% OF THE GROSS TURNOVER. THE A SSESSEE ALONGWITH THE RETURN OF INCOME FILED AUDITED BALANCE SHEET, TRADING AND PRO FIT & LOSS ACCOUNT, DETAILS OF SUNDRY CREDITORS/DEBTORS AND ADDITIONS TO THE IMMOV ABLE ASSETS AND DETAILS OF SECURED AND UNSECURED LOANS. THE ASSESSEE SUBMITTED THE DETAILS TIME TO TIME BEFORE THE AO. HOWEVER, THE AO FOUND THAT THE ASSES SEE HAS MADE APPROXIMATELY 90% OF THE PAYMENTS OF EXPENSES IN CASH FOR WHICH N O DOCUMENTARY EVIDENCES HAVE BEEN FILED AND EXPENSES ARE NOT VERIFIABLE. TH E BOOK RESULTS WERE ACCORDINGLY REJECTED U/S. 145(3) AND PROFIT RATE WAS INCREASED TO 3.10% FROM 2.90% AND ADDITION WAS MADE OF RS.14,50,120/-. THE ADDITION W AS CHALLENGED BEFORE THE LD. CIT(A). THE LD. CIT(A) GAVE ENHANCEMENT NOTICE TO T HE ASSESSEE AND IN ABSENCE OF ANY REPLY FROM THE SIDE OF ASSESSEE, THE LD. CIT(A) FOLLOWED HIS ORDER FOR PRECEDING ASSESSMENT YEAR 2005-06 AND FOUND THAT IN ASSESSMEN T YEAR 2004-05, THE ASSESSEE DECLARED NP RATE OF 3.09%, BUT ASSESSED BY THE DEPA RTMENT AT 3.5%. SIMILARLY, IN THE ASSESSMENT YEAR 2005-06, THE ASSESSEE DISCLOSED NP RATE OF 2.10% BUT ASSESSED AT 3.1%. THEREFORE, PROPORTIONATE INCOME SHOULD HAV E BEEN ENHANCED BY APPLYING THE NP RATE OF 3.75% AND ACCORDINGLY, THE AO WAS DI RECTED TO COMPUTE INCOME BY APPLYING NP RATE OF 3.75%. THE APPEAL OF THE ASSESS EE WAS DISMISSED WITH ENHANCEMENT. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO HAS NOT GIVEN ANY SPECIFIC FINDING AS TO WHICH OF THE EXPENSES ARE NO T VERIFIABLE. HE HAS SUBMITTED ITA NO. 47/AGRA/2013 3 THAT IN THE CONTRACT WITH THE GOVERNMENT DEPARTMENT , PROFIT MARGIN IS ALWAYS LOW AND THE ASSESSEE HAS ALREADY DECLARED SUBSTANTIAL P ROFIT FROM BUSINESS. THEREFORE, NO FURTHER ADDITION TO THE PROFIT AND ENHANCEMENT S HOULD HAVE BEEN MADE BY THE LD. CIT(A). HE HAS SUBMITTED THAT IN THE ABSENCE OF ANY EVIDENCE NET PROFIT RATE SHOULD NOT BE ENHANCED BY THE AUTHORITIES BELOW. SIMILARLY , WITHOUT CITING ANY COMPARABLE CASE FOR INSTANCE, THE ADDITION IS WHOLLY UNJUSTIFI ED. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE FOLLOWING DECISIONS : (I). DECISION OF HONBLE M.P. HIGH COURT IN THE CAS E OF DINA NATH DUBEY VS. CIT 160 ITR 1. (II). DECISION OF HONBLE M.P. HIGH COURT IN THE CA SE OF GANGA PAL SHARMA VS. CIT, 127 ITR 27. (III). DECISION OF HONBLE HARYANA HIGH COURT IN TH E CASE CIT VS. PAWAN KUMAR, 316 ITR 324. (IV). DECISION OF HONBLE RAJASTHAN HIGH COURT IN T HE CASE OF CIT VS. INAMI MARBLES (P) LTD., 316 ITR 125. (V). DECISION OF HONBLE ALLAHABAD HIGH COURT IN TH E CASE OF IN THE CASE OF DELTA ENGINEERING CO. (P) LTD. VS. CIT, 186 ITR 383 (VI). DECISION OF HONBLE KARNATAKA HIGH COURT IN T HE CASE OF SHANKAR KHANDSARI SUGAR MILLS VS. CIT, 193 ITR 669. (VII). DECISION OF HONBLE CALCUTTA HIGH COURT IN T HE CASE OF CIT VS. RANICHERRA TEA CO. LTD., 207 ITR 979. (VIII). DECISION OF HONBLE HIMANCHAL PRADESH HIGH COURT IN THE CASE OF NEW PLAZA RESTAURANT, 309 ITR 259. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDER S OF THE AUTHORITIES BELOW. 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE ADDITION IS ON EXCESSIVE SIDE. THE AO HAS MENTIONED IN THE ASSESSMENT ORDER THAT EXPENSES ARE NOT VERIFIABLE. NOTHING IS PRODUCED BE FORE US TO CONTRADICT THE ITA NO. 47/AGRA/2013 4 FINDINGS OF THE AO IN THIS REGARD. THEREFORE, THE R EJECTION OF BOOKS OF ACCOUNT IS JUSTIFIED IN THE MATTER. HOWEVER, IT IS WELL SETTLE D LAW THAT EVEN IF BEST JUDGMENT ASSESSMENT IS MADE, IT SHOULD BE MADE ON REASONABLE BASIS CONSIDERING THE HISTORY OF THE ASSESSEE, COMPARABLE CASES AND THE CIRCUMSTA NCES. THE REVENUE AUTHORITIES ARE NOT AUTHORIZED TO MAKE ARBITRARY AND UNREASONAB LE ASSESSMENT. THE AO HAS NOTED THAT 90% OF THE EXPENSES ARE MADE IN CASH. TH E ASSESSEE IS DOING CONTRACT WORK OF GOVERNMENT DEPARTMENTS WHERE THE PROFIT MAR GIN IS ALWAYS LOW. THE NATURE OF WORK EXECUTED BY THE ASSESSEE ALSO SUPPOR TS THE CASE OF THE ASSESSEE THAT PAYMENTS ARE ALWAYS MADE IN CASH. THE AO ENHANCED T HE NP RATE FROM 2.90% TO 3.10% TO PROVE THAT EVEN THE AO ACCEPTED THE CONTEN TION OF THE ASSESSEE THAT SUBSTANTIAL EXPENSES THOUGH MADE IN CASH HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THEREFORE, SUCH A CIRCUMSTANCE WOULD NOT BE READ AGAINST THE ASSESSEE TO ENHANCE THE PROFIT RATE EXORBITANTLY. THE FINDING OF THE AO THAT 90% OF THE EXPENSES ARE NOT VERIFIABLE IS THUS MEANINGLESS. IT IS ALSO WELL SETTLED LAW THAT PRINCIPLE OF RES JUDICATA DID NOT APPLY IN THE INCOME-TAX PROCEEDINGS. EVERY YEAR IS A DIFFERENT YEAR. THEREF ORE, MERELY BECAUSE THE ASSESSEE ACCEPTED A PARTICULAR NP RATE, PROPORTIONATE NP RAT E CANNOT BE DETERMINED WITHOUT POINTING OUT ANY SPECIFIC DEFECT OR INFIRMITY IN TH E VOUCHERS OF THE EXPENSES. SINCE THE AO HAS NOT GIVEN ANY DETAILS IN THE ASSESSMENT ORDER AS TO WHICH OF THE EXPENSES ARE NOT VERIFIABLE AND HE HAS MADE SLIGHT ENHANCEMENT IN THE NP RATE AND THE INCOME ENHANCED BY THE LD. CIT(A) BY APPLYING P ROFIT RATE OF 3.75% ON ITA NO. 47/AGRA/2013 5 PROPORTIONATE BASIS WAS NOT JUSTIFIED. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO ESTIMATE HIGHER PROFIT RATE IN THE CASE OF ASSESSEE . SIMILARLY, NO COMPARABLE INSTANCES OF THE SIMILAR BUSINESS HAVE BEEN BROUGHT ON RECORD. THEREFORE, THE JUDGMENT CITED BY THE LD. COUNSEL SQUARELY APPLIES TO THE CASE OF ASSESSEE. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES AND THE FACTS THAT ASSESSEE HAS DECLARED SUBSTANTIAL INCOME IN THE RETURN, THEREFOR E, IT WOULD MEET ENDS OF JUSTICE IF THE ADDITION IN LUMP SUM IN A SUM OF RS.5,00,000/- IS MAINTAINED AS AGAINST MADE BY THE AO AND THE LD. CIT(A). WE ACCORDINGLY SET AS IDE AND MODIFY THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE AO TO RESTRICT THE ADDITION OF RS.5,00,000/- ONLY AS AGAINST MADE BY THE AO AND THE LD. CIT(A). 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY