The Asstt. Commissioner of Income tax, Jalandhar V. Sh. Anil Kumar Prop., Jalandhar

ITA 471/ASR/2010

• Counselvise Citation: 47120914 RSA 2010
• Duration Of Justice: 3 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 09-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Business income; Depreciation; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.453(ASR)/2010 ASSESSMENT YEAR:2007-08 PAN :ABCPK9833G SH. ANIL KUMAR PROP. VS. DY. COMMR. OF INCOME TAX , M/S. SIDDARTH ENTERPRISES, RANGE-IV, ADAMPUR, JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) I.T.A. NO.471(ASR)/2010 ASSESSMENT YEAR:2007-08 PAN :ABCPK9833G ASSTT. COMMR. OF INCOME TAX, VS. SH. ANIL KUMAR PRO P. RANGE-IV, M/S.SIDDARTH ENTERPRISES, JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) C.O.NO.01(ASR)/2011 (ARISING OUT OF I.T.A. NO.471(ASR)/2010) ASSESSMENT YEAR:2007-08 PAN :ABCPK9833G SH. ANIL KUMAR PROP. VS. DY. COMMR. OF INCOME TAX , M/S.SIDDARTH ENTERPRISES, RANGE-IV, ADAMPUR, JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) I.T.A. NO.349(ASR)/2011 ASSESSMENT YEAR:2008-09 PAN :ABCPK9833G ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 2 SH. ANIL KUMAR PROP. VS. ASSTT.. COMMR. OF INCOME TAX, M/S.SIDDARTH ENTERPRISES, RANGE-IV, ADAMPUR, JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) I.T.A. NO.383(ASR)/2011 ASSESSMENT YEAR:2008-09 PAN :ABCPK9833G INCOME TAX OFFICER, VS. SH. ANIL KUMAR PROP. RANGE-IV(2), M/S.SIDDARTH ENTERPRISES, JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) ASSESSEE BY:NONE DEPARTMENT BY:SH. MAHAVIR SINGH, DR DATE OF HEARING: 01/01/2014 DATE OF PRONOUNCEMENT:17/01/2014 ORDER PER BENCH ; THESE CROSS APPEALS ONE BY THE ASSESSEE AND ANOT HER BY THE REVENUE ARISE FROM THE ORDER OF THE CIT(A), JALANDHAR, DATE D 28.09.2010 FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS ALSO FILE D C.O. FOR THE ASSESSMENT YEAR 2007-08. THE CROSS APPEALS FOR THE ASSESSMENT YEAR 2008-09 HAVE ALSO BEEN FILED AGAINST THE ORDER OF THE CIT(A ), JALANDHAR, DATED 31.03.2011. 2. THE GROUNDS OF APPEAL IN THE RELEVANT APPEAL ARE REPRODUCED AS UNDER: ITA NO.453(ASR)/2010 FOR THE A.Y. 2007-08 ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 3 1. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN REJECTING THE BOOK RESULTS U/S 145(3) OF THE INCOME TAX ACT AND SUSTAINING PART ADDITION, WITHOU T POINTING OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT MAI NTAINED IN THE NORMAL COURSE OF THE BUSINESS WHEN THE SAME ARE DULY AUDITED BY THE CHARTERED ACCOUNTANTS. 1.1. THAT THE ENTIRE EXPENSES BEING FULLY VOUCHED AND UT ILIZED FOR PROPER CARRYING ON THE CONTRACTS UNDERTAKEN THE LAB OUR CHARGES AND HIRE CHARGES CANNOT BE SAID TO BE INFLATED WITH OUT POINTING OUT ANY EXPENDITURE WHICH IS INFLATED. 1.2. THAT THE LD. CIT(A) IGNORED THAT ALL THE PURCHASES ARE FULLY VOUCHED BY EXTERNAL OR INTERNAL VOUCHERS, WITHOUT W HICH THE CONTRACTS OF REPAIRS AND CONSTRUCTION WORK COULD NO T BE CARRIED OUT AND THE MATERIAL WAS PURCHASED & UTILIZED FOR ALL THE WORKS BEING CARRIED OUT & NOT SEPARATELY FOR EACH CONTRAC T. 2. THAT ON THE FACTS CIRCUMSTANCES OF THE CASE WITH OUT PREJUDICE TO THE ABOVE GROUNDS, THE LD. CIT(A) IS UNJUSTIFIED IN ESTIMATING A FLAT RATE OF 12% ON THE TOTAL SALES AND CONTRACT RE CEIPTS OF OVER TWO CRORES, WITHOUT ANY BASIS. 3. THAT THE APPELLANT BEGS TO ADD OR AMEND ANY GROU ND OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. IT IS, THEREFORE, PRAYED THAT THE APPEAL BE ACCEPT ED AND NET PROFIT RETURNED BE KINDLY ACCEPTED. ITA NO.471(ASR)/2010 - A.Y. 2007-08 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN ALLOWING THE RELIEF AND HAS IGNORED THE FA CT THAT THE EXPENSES OF THE ASSESSEE WERE NOT VERIFIABLE AND PU RCHASES WERE ALSO FOUND TO BE BOGUS. 2. THAT THE LD. CIT(A) HAS NOT GIVEN ANY REASONABLE BA SIS FOR APPLYING THE RATE OF 12% ON THE TOTAL SALES AND CON TRACT RECEIPTS FOR WORKING OUT THE NET PROFIT OF THE ASSESSEE. ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 4 3. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SE T ASIDE AND THAT OF THE A.O. BE RESTORED. 4. THAT THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AME ND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DI SPOSED OF. C.O.NO.01(ASR)/2012 A.Y.2007-08 1. THAT THE LD. CIT(A) HAS RIGHTLY REJECTED THE CONTEN TIONS RAISED BY THE AO FOR MAKING THE ADDITIONS TO THE RETURNED INCOME BUT HAS GRAVELY ERRED IN APPLYING RATE OF 12% INSTEAD O F ACCEPTING THE BOOK RESULTS SHOWN BY THE ASSESSEE WHICH WERE D ULY SUPPORTED BY AUDITED ACCOUNTS & COMPLETE VOUCHERS E TC. 2. THAT THE RESPONDENT BEGS TO ADD OR AMEND ANY GROUND S OF CROSS OBJECTIONS BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. ITA NO.349(ASR)/2011 A.Y. 2008-09 1. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN REJECTING THE BOOK RESU LTS U/S 145(3) OF THE INCOME TAX ACT AND SUSTAINING PART ADDITION, WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE BOOKS OF AC COUNT MAINTAINED IN THE NORMAL COURSE OF THE BUSINESS WHE N THE SAME ARE DULY AUDITED BY THE CHARTERED ACCOUNTANTS. 1.1. THAT THE ENTIRE EXPENSES BEING FULLY VOUCHED A ND UTILIZED FOR PROPER CARRYING ON THE CONTRACTS UNDERTAKEN THE LAB OUR CHARGES AND HIRE CHARGES CANNOT BE SAID TO BE INFLATED WITH OUT POINTING OUT ANY EXPENDITURE WHICH IS INFLATED. 1.2. THAT THE LD. CIT(A) IGNORED THAT ALL THE PURCH ASES ARE FULLY VOUCHED BY EXTERNAL OR INTERNAL VOUCHERS, INCLUDING FOR RS.105619/- WITHOUT WHICH THE CONTRACTS OF REPAIRS AND CONSTRUCTION WORK COULD NOT BE CARRIED OUT AND THE MATERIAL WAS PURCHASED & UTILIZED FOR ALL THE WORKS BEING CARRI ED OUT & NOT SEPARATELY FOR EACH CONTRACT. 2. THAT ON THE FACTS CIRCUMSTANCES OF THE CASE WITH OUT PREJUDICE TO THE ABOVE GROUNDS, THE LD. CIT(A) IS UNJUSTIFIED IN ESTIMATING A ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 5 FLAT RATE OF 8% ON THE TOTAL SALES AND CONTRACT REC EIPTS OF OVER TWO CRORES, WITHOUT ANY BASIS. 3. THAT THE APPELLANT BEGS TO ADD OR AMEND ANY GROU ND OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. IT IS, THEREFORE, PRAYED THAT THE APPEAL BE ACCEPT ED AND NET PROFIT RETURNED BE KINDLY ACCEPTED. ITA NO.383(ASR)/2011 A.Y. 2008-09 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN ALLOWING THE RELIEF AND HAS IGNORED THE FA CT THAT THE EXPENSES OF THE ASSESSEE WERE NOT VERIFIABLE AND PU RCHASES WERE ALSO FOUND TO BE BOGUS. 2. THAT THE LD. CIT(A) HAS NOT GIVEN ANY REASONABLE BA SIS FOR APPLYING THE RATE OF 8% ON THE TOTAL SALES AND CONT RACT RECEIPTS FOR WORKING OUT THE NET PROFIT OF THE ASSESSEE. 3. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SE T ASIDE AND THAT OF THE A.O. BE RESTORED. 4. THAT THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AME ND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DI SPOSED OF. 3. FIRST OF ALL, WE TAKE UP THE APPEALS FOR THE ASS ESSMENT YEAR 2007-08 AS UNDER: THE BRIEF FACTS ARE THAT THE ASSESSEE DERIVES INCO ME FROM CARRYING ON THE BUSINESS AS CIVIL CONTRACTOR. THE ASSESSEE WAS GIVEN SHOW CAUSE NOTICE, WHICH IS REPRODUCED IN PARA 2 OF AOS ORDER AT PAGE S 1 TO 3. THE ASSESSEE MADE SUBMISSIONS WHICH ARE REPRODUCED IN AOS ORDER AT PAGE 4. THE AO ULTIMATELY MADE AN ADDITION OF RS.4408113/- ON ACCO UNT OF LABOUR CHARGES ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 6 CLAIMED, RS.150591/- ON ACCOUNT OF HIRE CHARGES , RS.2,23,000/- ON ACCOUNT OF SALARY AND RS.9,40,483/- ON ACCOUNT OF MATERIAL PURCHASED. FOR THE SAKE OF CONVENIENCE, THE RELEVANT FINDINGS OF THE AO AT PAGES 4 TO 8 ARE REPRODUCED AS UNDER: 3. ASSESSEES REPLY HAS BEEN CONSIDERED. IT IS MOR E GENERAL AND DISMISSIVE AND NOT SPECIFIC. IT WAS EMPHATICALLY RE QUIRED OF THE ASSESSEE AS PER LAST PART OF PARA-1(II) REPRODUCED ABOVE ON PAGE 3. EVEN THE INFORMATION REGARDING NATURE OF CONTRACTOR S FURNISHED IS NOT CORRECT. ASSESSEES CLAIM THAT HE GET ONLY SMALL CO NTRACTS AND LABOUR JOBS FOR FITTINGS PUMPS IS NOT CORRECT. AS PER TDS CERTIFICATES THE ASSESSEE EXECUTED THE FOLLOWING CONTRACTS DURING TH E YEAR:- S.NO. NATUE OF CONTRACTEE RECEIPT (RS.) 1. SH.VRAJENDRA KUMAR EE, GE 8474797/- 2. SH.S.K.AGGARWAL, EE 8115570/- MES ADAMPUR 3. EE IRG. CUM PH 228681/- DIVISION DALHOUSIE 4. D.SURESH REDDY EE SOUTH, DELHI CANTT. 1616808/- 5. EE-HP,IRIG & P.H. DIVISION 939357/- SALOONI, CHAMBA, HP CONTRACT AT SR. NO.3 MAY BE SMALL. BUT OTHER CONTRA CT ARE QUITE OF SOME SUBSTANTIVE SCALE. 3A. VARIATION IN RATIOS OF MONTHWISE WAGES CLAIMED HAS NOT BEEN EXPLAINED AT ALL WITH ANY SPECIFIC DATA JUSTIFICATI ON. IS IT POSSIBLE THAT MONTHWISE WAGES PAID ARE EVEN MORE THAN THE MATERIA L USED FOR EXECUTION OF CONTRACT WHATEVER BE THE NATURE OF CON TRACT ESPECIALLY THE TYPE OF CONTRACT EXECUTED BY THE ASSESSEE. IF NATUR E OF MATERIAL USED IS ANY INDICATE WHEN WE EXAMINED THE NATURE OF THIS MA TERIAL IN DATA CHART ON PAGE-8. ONLY IN THE MONTHS OF MAY, 2006 OR DEC., 2006 ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 7 MATERIAL VALUE IS HIGHER THAN THE WAGES PAID THAT T OO BY PALTRY %AGES OF 8.75 AND 12.46. LABOUR WAGES OF RS.1236300/- HAVE BEEN DECLARED PA YABLE AS ON 31.03.2007. THE ASSESSEE IN REPLY TO QUERY NO.8 OF THE LETTER DATED 18.12.2008 DID NOT FURNISH THE BIFURCATION OF MONT HWISE WAGES PAYABLE LEADING TO CUMULATED SUM OF RS.1236300/- AN D SIMPLY REPLIED AS UNDER AS PER REPLY FILED ON 23.12.2009. THE PART PAYMENT IS MADE TO LABOUR DURING THE YEA R AND AT THE END OF THE YEAR THE LABOUR PAYABLE STOOD AT RS.123 6300/- WHICH PERTAINED TO THE LAST 3 MONTHS OF THE PREVIOUS YEAR . THE SAME WAS PAID IN THE NEXT YEAR. DETAIL THEREOF IS ENCLOSED IN THE SHAPE OF COPY OF ACCOUNT OF THE NEXT YEAR. LEDGER ACCOUNT 1-APR-2007 TO 30 JUN-2007 DATE PARTICULARS VEH. TYPE VEH. NO. DEBIT CREDIT 1.4.2007 OPENING BALANCE 1236300. 12.4.2007TO CASH PAYMENT 1,79,400 28.5.2007 TO CASH PAYMENT 1,77,600 19.6.2007 TO CASH PAYMENT 4,35,200 26.6.2007 TO CASH PAYMENT 3,58,900 27.6.2007 TO CASH PAYMENT 85,200__________ _ 12,36,300.00 1236300.00 IS IT POSSIBLE THAT LABOUR WHO EARNS RS.100-150 A D AY CAN WAIT FOR HIS WAGES FOR 4 TO 9 MONTHS. FROM WHERE WILL HE FILL HIS BELLY WHEN HE IS ALREADY IN THE B.P.L. CATEGORY OF INDIAS PO PULATION? IS HIS AND HIS FAMILYS SURVIVAL POSSIBLE UNDER THESE CONDITIO NS? GENERALLY WAGES ARE PAID EVERY WEEK AND AT THE MOST BI-WEEKLY , I AM SURE ASSESSEE IS NOT AS INHUMAN AS TO RENDER THE LABOUR AND THEIR FAMILIES STARVE TO DEATH BY KEEPING THEM WAITING FOR 3 TO 9 MONTHS TO GET THEIR PETTY WAGES WHICH ARE HARDLY ENOUGH TO PROVIDE THEM ATTA/CHAWAL/DAL. WAGES PAYABLE AT RS.1236000 ARE TREATED AS FAKE AND BOGUS AND REPRESENT ASSESSEES CONCEALED INCOM E AND THIS ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 8 AMOUNT IS TREATED AS ASSESSEES ASSESSABLE INCOME. PENALTY PROCEEDINGS U/S 271(1)(C) ARE INITIATED ON THIS ISS UE FOR CONCEALMENT OF INCOME. 3B. THE HUGE VARIATIONS CONFRONTED TO THE ASSESSEE AS PER SHOW CAUSE NOTICED DATED 3.12.2009 ARE FURTHER HORRIFYIN G WHEN THE RATIOS OF MONTH-WISE WAGES W.R.T. MONTH WISE RECEIPTS AS P ER COLUMN 10 OF CHART A ARE ANALYSED. IN THE MONTHS OF APRIL, JUN E, 2006 AND FEB., 2007 THESE WAGES ARE 184.99%, 115.35% AND 140.16% O F THE TOTAL CONTRACT RECEIPTS WHICH FACT IS REALLY MIND BOGGLI NG. THE ASSESSEE HAS FAILED TO GIVE ANY REASONABLE EXPLANATION FOR SUCH VARIATIONS IN THE MONTHWISE RATIOS. BOOKS OF ACCOUNT ON THIS ACCOUNT ALSO ARE NOT RELIABLE AT ALL FOR ASCERTAINING THE TRUE AND CORRE CT ASSESSABLE INCOME OF THE ASSESSEE AND ARE, THEREFORE, REJECTED U/S 14 5(3) OF THE ACT AND INCOME IS COMPUTED UNDER THIS SECTION AFTER RESTRIC TING THE WAGES TO 35% OF THE CONTRACT RECEIPTS OF RS.20008818 AT RS. 70003086/- WHICH IS ALMOST EQUAL TO TOTAL PURCHASES DECLARED BY THE ASSESSEE. BALANCE OF RS.4408113/- IS DISALLOWED AND TREATED AS ASSESS EES CONCEALED INCOME. PENALTY PROCEEDINGS U/S 271(1)(C) ARE TO BE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME ACCOMPA NIED BY A CAVALIER ATTEMPT AT CONCEALMENT OF INCOME. ADDITION OF RS.1236300/- MADE IN PARA 1A IS TREATE D AS HAVING TELESCOPE WITH THIS ADDITION OF RS.7003086/-. 3C ON THE ISSUE OF HIRE CHARGES ASSESSES RELY IS GENERAL. AS COMPARED TO LAST YEAR FOR THE YEAR UNDER ASSESSMENT EXPENSES UNDER THIS HEAD ARE HIGHER BY 0.75% OF RECEIPTS AS COMPAR ED TO LAST YEAR. IT IS UNDERSTOOD THAT MORE MONEY IS CHARGED FROM THE C ONTRACTEE AS PER COST OF EXECUTING THE CONTRACT AND HIRE CHARGES AR E ALSO INCLUDED IN SUCH ESTIMATES OF TENDERS SUBMITTED FOR AWARD OF CO NTRACTS.ASSESSEE HAS ALSO NOT FURNISHED AY DATA TO JUSTIFY THE HIRE CHARGES RATIO. EVEN THE DETAILS ABOUT NATURE OF CONTRACTS HAVE NOT BEEN FURNISHED BY THE ASSESSEE. NO COPY OF ACCOUNT AND COPIES OF BILLS OF HIRE CHARGES HAVE BEEN FURNISHED. ASSESSEES REPLY BEING DEVOID OF ANY MERIT IS REJECTED AS SUCH. BOOKS OF ACCOUNT ARE NOT RELIABLE FOR ASCERTAINING THE TRUE AND CORRECT ASSESSABLE INCOME OF THE ASSES SEE AND ARE REJECTED AS SUCH ON THIS ISSUE U/S 145(3) OF THE AC T. INCOME IS COMPUTED AS PER PROVISIONS OF THIS SECTION. EXPENSE S OF RS.150591/- ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 9 @ 0.75% OF THE RECEIPTS CLAIMED HIGHER IN COMPARISO N TO THE PRECEDING A.Y. ARE DISALLOWED. PENALTY PROCEEDINGS ARE INITIATED U/S 271(1)(C) ON THIS ISSUE. ON THE ISSUE OF INCREASE IN SALARY AS PER PARA 2 O F THE SHOW CAUSE NOTICE THE ASSESSEES REPLY IS AS UNDER: DETAIL OF PERSONWISE SALARY PAID TO STAFF IS ENCLOS ED. THE STAFF KEEPS ON INCREASING OR DECREASING WITH THE REQUIREM ENT OF FOREMEN ETC AT SITE. AOS TREATMENT:- 4. THE REPLY IS SIMPLY FLAT AND IS NOT ACCOMPANIED BY ANY IOTA OF EVIDENCE WHATSOEVER REGARDING THE CLAIM OF INCREASE /DECREASE OF STAFF WITH THE DIRECT RATIO OF THE NECESSITY OF REQUIREME NT AT SITE. ON EVERY ISSUE ASSESSEES REPLY IS LIKE THROWING S OMETHING IN A BLACK HOLE. ASSESSEES LD. COUNSEL IS FULLY AWARE O F THE FACTS AND IS INTELLIGENT. BUT INTELLIGENCE CAN WORK ONLY IF THE CLAIMS OF THE ASSESSEE ARE GROUNDED IN THE BOOKS OF ACCOUNT MAINTAINED IN THE TRUE FACTUAL SPIRIT THE CONDUCT OF BUSINESS AND GROUNDED A BIT I N THE EARTHLY REALITY. ON THIS ISSUE ALSO BOOKS OF ACCOUNT ARE NOT RELIAB LE AT ALL FOR DETERMINING THE TRUE AND CORRECT ASSESSABLE INCOME OF THE ASSESSEE AND ARE REJECTED AS SUCH. SALARY IS RESTRICTED TO RS.41 ,750/- P.M. I.E. PAYABLE FOR THE MONTH OF APRIL, 2006. THE ASSESSEE S CLAIM OF CONTRACTS BEING OF RENOVATION AND ALTERATION OF EXI STING BUILDING SMALL PROJECTS AND LABOUR JOB OF BORING ETC. GOES AGAINST THE CLAIM OF RAPID HIKES IN SALARY AFTER EVERY 2-3 MONTHS. SALARY IS R ESTRICTED TO 5,01,000 AND THE BALANCE OF RS.3,23,000/- IS TREATED AS ASSE SSEES CONCEALED INCOME. 5. THE ASSESSEE WAS ASKED TO FURNISH ITEMWISE COPIE S OF BILLS OF PURCHASE OF MATERIAL PROPERLY BUNCHED ITEMWISE UND ER SR. NO.4 OF THE REQUISITION DATED 18.12.2009. THE SAID COPIES WERE FURNISHED ON 23.12.2009 IN BUNCHES MIXING EACH ITEM OF MATERIAL. THESE WERE RE- ARRANGED ITEMWISE AS FAR AS I COULD UNDERSTAND THE NATURE OF PURCHASE AND MONTHWISE/ITEMWISE DATA CHART WAS PREPARED IS R EPRODUCED AS UNDER: SEE PAGE 7 OF AOS ORDER ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 10 GRAND TOTAL OF PURCHASE COMES TO 5979986 PURCHASE DECLARED BY THE ASSESSEE 6920469 DIFFERENCE DETECTED 940483 ON THE HIGHER SIDE THE ASSESSEE HAS DEBITED PURCHASE ON THE HIGHER SID E BY RS.940483/- THIS AMOUNT IS TREATED AS ASSESSEES CONCEALED INC OME IN THE SHAPE OF INFLATED/BOGUS PURCHASE OF RS.940483/-. PE NALTY PROCEEDINGS ARE SEPARATELY INITIATED ON THIS ISSUE FOR CONCEALM ENT OF INCOME. 6. IN THE LIGHT OF THE ABOVE FACTS AND DISCUSSION, THE TOTAL INCOME OF THE ASSESSEE IS RECOMPUTED AS UNDER: INCOME AS PER RETURN RS.6,20,110/- ADDITION AS PER PARA 3.A AS DISCSSUED ABOVE. RS. NI L ADDITION AS PER PARA 3A IS TREATED AS HAVING TELESC OPE WITH MAIN ADDITION OF RS.44,08.113 AS DISCUSSED IN PARA 3B PAGE 6 RS.44,08,113/- ADDITION AS PER PARA 3C AS DISCUSSED ABOVE 1,50,591 /- ADDITION AS PER PARA 4 AS DISCUSSED ABOVE RS.9,40,4 83/- TOTAL TAXABLE INCOME RS.64,42,897/- ROUNDED OFF RS.64,42,900/- 4. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CONFIRMED THE ADDITION ON ACCOUNT OF LABOUR PAYMENT S, HIRE CHARGES AND MATERIAL PURCHASES BUT DELETED THE ADDITION ON ACCO UNT OF SALARY. THE LD. CIT(A) VIDE PARA 8.1 OF HIS ORDER AFTER CONFIRMING SPECIFIC ADDITIONS AS MENTIONED HEREINABOVE OBSERVED THAT IT WOULD BE FAI R TO LIMIT THE DISALLOWANCE OUT OF LABOUR CHARGES, HIRE CHARGES A ND MATERIAL PURCHASES AFTER ALLOWING DEPRECIATION AND ALL OTHER OUTGOINGS TO 12% OF THE SALES AND CONTRACT RECEIPTS WHICH COMES TO RS.25,95,278/- AN D RESTRICTED THE SPECIFIC ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 11 DISALLOWANCES CONFIRMED TO RS.17,96,251/- BEING 12% OF THE CONTRACT RECEIPTS OF RS.2,16,27,317/-. 5. INSPITE VALID SERVICE OF NOTICE, NONE APPEARED O N BEHALF OF THE ASSESSEE AND THEREFORE, WE ARE DECIDING THE ISSUE AFTER HEAR ING THE LD. DR AND THE MATERIAL AVAILABLE ON RECORD. 6. THE LD. DR AT THE OUTSET, RELIED UPON THE ORDER OF THE AO EXCEPT THE LD. CIT(A) WAS NOT JUSTIFIED IN APPLICATION OF RATE OF 12% ON TOTAL CONTRACT RECEIPTS WHICH IS WITHOUT ANY REASONABLE BASIS. 7. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIA L AVAILABLE ON RECORD. WE DO NOT CONCUR WITH THE VIEWS OF THE LD. CIT(A) AS REGARDS THE ADDITION OF LABOUR CHARGES THAT THE DISALLOWANCE IS MADE FIRSTLY FOR THE REASON THAT THE LABOUR CHARGES PAID DID NOT CORRESP OND WITH THE PURCHASE OF MATERIAL ON A MONTH TO MONTH BASIS AND ALSO BECAUSE OF OUTSTANDING LABOUR CHARGES AT THE END OF THE YEAR. THOUGH ASSESSEES E XPLANATION THAT IT WAS DOING SMALL CONTRACTS DOES NOT APPEAR TO BE BORNE O UT FROM THE MATERIAL AVAILABLE ON THE ASSTT. RECORD. BUT THE ASSESSEE HA D RECONCILED THE CONTRACT RECEIPTS WITH THE TDS CERTIFICATES DURING THE ASST T. PROCEEDINGS AND HAD SUBMITTED COPIES OF ALL THE BILLS RAISED BY HIM TO THE AO. COPIES OF ORDERS PLACED ON IT BY THE CONTRACTING PARTIES WERE ALSO P LACED ON RECORD. THESE PARTICULARS ENDORSE THE ASSESSEES CONTENTION THAT WAS EXECUTING CONTRACTS ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 12 WHICH WERE VALUED AT A FEW LACS RUPEES WITH THE LAR GEST CONTRACT OF RS.16,43,869/- FROM THE EE_ ADAMPUR. THE OTHER CONT RACTS WERE OF RS.1,30,000/-, RS.2,21,000/-, RS.5 LACS AND RS.11 L ACS ETC. FROM THE SAME PARTY, THOUGH FOR DIFFERENT WORKS. THE ASSESSEES CONTENTION, THEREFORE, THAT IT WAS NOT EXECUTING VERY LARGE WORKS CONTRACTS DOE S NOT APPEAR TO BE CORRECT. THE ASSESSEES CONTENTION THAT THE CONTRAC TS WERE LABOUR INTENSIVE INVOLVING LESS USE OF MATERIAL ALSO APPEARS TO BE C ORRECT SINCE THE TOTAL PURCHASES CLAIMED AT AROUND RS.69 LACS IS ONLY AROU ND 35% OF THE CONTRACT RECEIPTS, INDICATING MORE USE OF LABOUR. THE CONTRA CTS, ACCORDING TO THE ASSESSEE, ARE OF NATURE OF REPAIR TO ROAD AND BUILD ING ETE; WHICH IS SUPPORTED BY THE COPIES OF WORK ORDERS PLACED IN THE ASSTT. R ECORDS. THERE ARE VERY FEW CONTRACTS OF FRESH CONSTRUCTION. SUCH CONTRACTS WOU LD REQUIRE LESSER AMOUNT OF MATERIAL TO BE CONSUMED THAT A REGULAR WORKS CON TRACT. LD. CIT(A) OBSERVED RIGHTLY THAT IT MAY NOT BE POSSIBLE TO COM PARE THE LABOUR CHARGES WITH THE VALUE OF MATERIAL PURCHASED EVERY MONTH, F IRSTLY FOR THE REASON THAT THE NATURE OF WORK COULD VARY AND SECONDLY BECAUSE THE ASSESSEE MAY BE MAKING SLIGHTLY MORE PURCHASES THAN REQUIRED IMMEDI ATELY. THE LD. CIT(A) WAS RIGHTLY NOT SATISFIED THAT ASSESSEE WAS MAKING BULK PURCHASES OF MATERIAL TO BE USED AS AND WHEN REQUIRED. NO PRUDEN T BUSINESSMEN WOULD SPENT MONEY AND BLOCK HIS FUNDS ON MATERIAL WHICH M AY OR MAY NOT BE ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 13 REQUIRED AND EVEN IF PREQUIRED, COULD BE CONSUMED A T A MUCH LATER DATE. IN THIS CONTEXT, IT IS SIGNIFICANT TO NOTE THAT NO UN USED MATERIAL IS SHOWN AS LYING THE CLOSING STOCK OF THE ASSESSEE IN THE BALA NCE SHEET OR IN THE P & L ACCOUNT. THE ASSESSEES CONTENTION THAT LABOUR CHAR GES VARIED SINCE THE PAYMENT TO LABOUR WAS MADE ON RECEIPT OF CONTRACT M ONEY DOES NOT AGREE WITH THE METHOD OF ACCOUNTING STATED TO BE FOLLOWED BY THE ASSESSEE. AS PER THE TAX AUDIT REPORT THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING WHICH REQUIRES THE ASSESSEE TO ACCOUNT F OR EXPENDITURE AS AND WHEN INCURRED, EVEN IF NOT PAID. THE WAGES SHOULD, THEREFORE, BE ACCOUNTED FOR WHEN THE LABOUR HAS DONE THE WORK. WHILE THE A CCOUNTING OF INCOME FOR WORK DONE MAY BE SUBJECT TO ACCEPTANCE OF BILL RAIS ED BY THE ASSESSEE, THE ASSESSEE WOULD BE REQUIRED TO SHOW THE UNBILLED WOR K AS WORK IN PROGRESS IN THE CLOSING STOCK. THIS CONTENTION OF THE ASSESSEE REGARDING DEFERRED ACCOUNTING OF WAGES TO EXPLAIN THE MONTHLY VARIATIO N, THEREFORE, DOES NOT APPEAR TO BE CORRECT. THE ASSESSEES CONTENTION THA T THE PAYMENT TO LABOURERS WAS MADE UPTO THREE TO FOUR MONTHS AFTER THE WORK WAS DONE ALSO DOES NOT APPEAR TO BE CREDIBLE. THE ASSESSEE HAS NOT SHOWN THE FUND FLOW TO SHOW UNAVAILABILITY OF CASH FOR PAYMENT TO THE WORKERS I MMEDIATELY AFTER THEY DID THE WORK. IN FACT, AS AGAINST THE OUTSTANDING LABOU R CHARGES OF RS.12.36 LACS AS ON 31.3.2007 IN THE BALANCE SHEET, THE ASSESSEE HAS MONEY IN BANK OF ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 14 MORE THAN RS. 10 LACS ON 31.3.2007. IT IS QUITE WEL L KNOWN THAT PAYMENT TO LABOURER ARE ALMOST ALWAYS MADE IN CASH AND SUCH PERSONS MAY NOT BE AVAILABLE FOR VERIFICATION. THE LABOUR CHARGES SHOU LD CORRESPOND SOMEWHAT AT LEAST WITH THE MATERIAL PURCHASED SINCE THE WOR K CONTRACTS OF THE ASSESSEE ARE OF THE NATURE OF REPAIRS IN WHICH CERTAIN MATE RIAL IS REQUIRED IN ALMOST ALL THE WORKS. HENCE, EVEN IF THE CONTRACTS ARE SMALL, THERE SHOULD BE SOME CO- RELATION BETWEEN THE MATERIAL PURCHASED AND THE LAB OUR CHARGES OR BETWEEN THE RECEIPTS AND LABOUR CHARGES. IT IS ALSO SEEN TH AT EVEN THOUGH THE RECEIPTS OF THE ASSESSEE ARE HIGHER BETWEEN THE MONTHS OF JU LY, 2006 TO JAN., 2007 PEAKING TO RS.26.96 LACS IN SEPT.,2006, THE LABOUR CHARGES HAVE INCREASED IN THE MONTHS OF FEB AND MARCH, 2007 WHEN THE WORK DON E BY THE ASSESSEE AND THE RECEIPTS HAVE REDUCED SIGNIFICANTLY. BUT T HE ASSESSEE HAS SUBMITTED THE EXPLANATION IN THIS REGARD AND SUBMITTED THE MO NTH-WISE CHART WHICH IS ON RECORD. THE LD. CIT(A), THEREFORE, IS NOT JUSTIF IED IN CONFIRMING THE ADDITION OF RS.44,08,113/- 8. AS REGARDS THE ADDITION OF HIRE CHARGES AMOUNTIN G TO RS.150,591/-, WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT ASS ESSEES EXPENDITURE CAN VARY DEPENDING UPON THE NATURE OF MACHINERY HIRED A ND THE PAYMENT HAS BEEN MADE TO VARIOUS PEOPLE BELONGING TO UNORGANIZE D SECTOR. THE DETAILS OF PAYMENT ARE ENTIRELY IN CASH BUT COPIES OF RELEVANT BILLS WERE NOT SUBMITTED ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 15 BEFORE ANY OF THE AUTHORITIES BELOW OR EVEN BEFORE US. THE EXPENDITURE REMAINS UNVERIFIABLE. BUT AT THE SAME TIME, THESE E XPENDITURES HAVE ACTUALLY BEEN INCURRED TO SOME EXTENT, EVEN IF NO BILLS HAVE BEEN PRODUCED. IT CANNOT BE SAID THAT NO EXPENSE HAS BEEN INCURRED. THE LD. CIT(A) SHOULD HAVE ALLOWED SOME EXPENDITURE ON DEDUCTION. THEREFORE, W E DO NOT CONCUR WITH THE VIEWS OF THE LD. CIT(A) CONFIRMING THE ACTION O F THE A.O. 9. AS REGARDS THE ADDITION OF SALARY, THE SAME IS N OT DISPUTE BEFORE US AND THEREFORE, WE DO NOT TAKE UP THIS ISSUE. 10. AS REGARDS THE ADDITION ON ACCOUNT OF MATERIAL PURCHASED, THE AO ASKED FOR THE SUBMISSION OF COPIES OF BILLS FOR PUR CHASE OF MATERIAL WHICH WAS SUBMITTED BY THE ASSESSEE AND WHICH WERE TALLIE D BY THE AO EACH BILL- WISE AND FOUND THAT THE TOTAL OF THE BILLS WAS LESS ER THAN THE AMOUNT OF PURCHASES CLAIMED IN THE RETURN OF INCOME BY RS.9,4 0,483/-. THE EXPLANATION OF THE ASSESSEE IN THIS REGARD WAS THAT THE SAID DI FFERENCE ON ACCOUNT OF PURCHASE OF MATERIAL MADE THROUGH VOUCHERS, WHICH W ERE SIGNED BY THE SELLERS, WHICH WERE STATED TO BE TRUCK AND TROLLEY OWNERS WHO DO NOT MAINTAIN ANY SALE BILLS. AS REGARDS DATA CHART, THE CLAIM HAS NOT BEEN CONFRONTED TO THE ASSESSEE, THEREFORE, IT CANNOT BE CONCLUDED THAT THE WHOLE SAID EXPENDITURE IS BOGUS AND ACCORDINGLY THE ACTI ON OF THE LD. CIT(A) CONFIRMING THE WHOLE ADDITION OF RS.9,40,483/- IS N OT JUSTIFIED. ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 16 11. AS REGARDS THE REJECTION OF BOOKS OF ACCOUNT, W HICH HAS BEEN CONTESTED BY THE ASSESSEE, THIS PROPOSITION OF THE ASSESSEE AT THE OUTSET IS INCORRECT, KEEPING IN VIEW THE FINDINGS OF THE AO A ND THE LD. CIT(A) FOR THE REASONS THAT THE ASSESSEE DID NOT PRODUCE BILLS FOR PURCHASES TOTALING RS.9,40,483/- WHICH ARE APPARENTLY NOT VERIFIABLE. SIMILARLY, IN RESPECT OF HIRE CHARGES ALSO, THE EXPENSES ARE ADMITTEDLY TOWA RDS PAYMENT TO UNORGANIZED SECTOR AND NOT FULLY VERIFIABLE. THE PA YMENTS OF LABOUR CHARGES ARE NOT VERIFIABLE, THOUGH THE ASSESSEE MAY HAVE PR EPARED VOUCHERS IN SUPPORT OF THE EXPENSES BUT THEY WERE NOT VERIFIABL E BEING INTERNAL VOUCHERS. ACCORDINGLY, BOOKS OF ACCOUNT CANNOT BE SAID TO BE CORRECT, ESPECIALLY IN THE CIRCUMSTANCES WHEN THE EXPENSES ARE NON-VERIFIABLE FOR WHICH NO COGENT EXPLANATION IS ON RECORD. THOUGH ON THE BASIS OF R ATIOS, AS INDICATED IN AOS ORDER ALONE THE PROVISIONS OF SECTION 145(3) C ANNOT BE INVOKED BUT AT THE SAME TIME THERE ARE DEFECTS AS POINTED OUT IN THE ORDERS OF THE AUTHORITIES BELOW AND AS MENTIONED HEREINABOVE. ACCORDINGLY, W E FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY CONFIR MED THE ACTION OF AO FOR CONFIRMING THE APPLICABILITY OF SECTION 145(3) OF T HE ACT. 12. AS REGARDS THE FINDING OF THE LD. CIT(A) IN PA RA 8.1, WE ARE NOT CONVINCED WITH THE FINDINGS IN THE SAID PARA 8.1 A ND ACCORDINGLY THERE HAS TO BE IN FACT, ESTIMATION OF INCOME, ONCE BOOKS OF ACC OUNT OF THE ASSESSEE ARE ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 17 REJECTED BY INVOKING THE PROVISIONS OF SECTION 145( 3) OF THE ACT. THEREFORE, THE AO IS NOT JUSTIFIED IN MAKING SPECIFIC ADDITION ON DIFFERENT HEADS OF PROFIT AND LOSS ACCOUNT. THE LD. CIT(A) HAS APPLIED A NET PROFIT RATE OF 12% ON TOTAL CONTRACT RECEIPTS WHICH IS WITHOUT ANY BAS IS. THE LD. DR HAS NOT PLACED ANY ARGUMENT FOR JUSTIFYING NET PROFIT RATE AT 12%. WHEREAS ON THE CONTRARY, IN ASSESSEES PAPER BOOK THE ASSESSEE HAS PLACED THE DECISION OF THIS BENCH IN ITA NO.366(ASR)/2010 & C.O.NO.30(ASR) /2010 DATED 30.04.2012 IN THE CASE OF SURINDER PAL NAYYAR CONTR ACTOR WHERE A N.P. RATE OF 5% HAS BEEN ACCEPTED BY US. ALSO THE ASSESSEE HA S PLACED ON RECORD THE DECISION IN THE CASE OF MOHAN SINGH CONTRACTOR IN I TA NO.59(ASR)/2012 DATED 5.6.2012, ON IDENTICAL ISSUE, WHERE WE HAVE D IRECTED THE AO TO APPLY A NET PROFIT RATE OF 5% ON THE CONTRACT RECEIPTS. ACC ORDINGLY, FOLLOWING OUR OWN DECISIONS IN THE CASE OF SURINDER PAL NAYYAR CO NTRACTOR (SUPRA) AND MOHAN SINGH CONTRACTOR (SUPRA), WE DIRECT THE A.O. TO DELETE ALL THE SPECIFIC ADDITIONS MADE AND APPLY A NET PROFIT RATE OF 5% ON CONTRACT RECEIPTS DECLARED BY THE ASSESSEE. ACCORDINGLY, BOTH THE OR DERS OF THE AUTHORITIES BELOW ARE MODIFIED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE AND TH AT OF THE ASSESSEE ALONGWITH C.O. OF ASSESSEE ARE PARTLY ALLOWED. ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 18 14. NOW, WE TAKE UP APPEALS OF THE ASSESSEE AND THE REVENUE FOR THE ASSESSMENT YEARS 2008-09. THE BRIEF FACTS IN THE PR ESENT APPEALS ARE THAT THE AO ISSUED SHOWED CAUSE NOTICE DATED 13.12.2010 WHIC H IS REPRODUCED AT PAGES 2 TO 4 OF AOS ORDER AND ASSESSEES REPLY DAT ED 16.12.2010 IS REPRODUCED AT PAGES 4 TO 6 OF AOS ORDER. THE AO UL TIMATELY MADE AN ADDITION OF RS.27,36,902/- ON ACCOUNT OF WAGES AND RS.1,05,619/- ON ACCOUNT OF PURCHASES WITHOUT PROPER BILLS. THE FI NDINGS OF THE AO FOR THE SAKE OF CONVENIENCE ARE REPRODUCED AS UNDER: 3. ASSESSEES REPLY HAS BEEN CONSIDERED IT IS MORE GENERAL AND DISMISSIVE AND NOT SPECIFIC, IT WAS EMPHATICALLY RE QUIRED OF THE ASSESSEE AS PER LAST PART OF PARA-1(II) REPRODUCED ABOVE ON PAGE EVEN THE INFORMATION REGARDING NATURE OF CONTRACTS FURNI SHED IS NOT CORRECT. ASSESSEES CLAIM THAT HE GETS ONLY SMALL CONTRACTS AND LABOUR JOBS FOR FITTING PUMPS IS NOT CORRECT. AS PER TDS CERTIFICAT ES THE ASSESSEE EXECUTED THE FOLLOWING CONTRACTS DURING THE YEAR: SL.NO. NAME OF CONTRACTOR RECEIPT 1. GARRISON ENGINEER (AF) ADAMPUR 1,17,23,975/- 2. GARISON ENGINEER (AF), BATHINDA. 13,67,048/- 3. GARISSON ENGINEER (EE), KAPURTHALA 1,19,53,406/ - 4. GARRISON ENGINEER (SOUTH), DELHI 8,15,425/- 4. VARIATIONS IN RATIOS OF MONTHWISE WAGES CLAIMED HAS NOT BEEN EXPLAINED AT ALL WITH ANY SPECIFIC DATA JUSTIFICATI ON. IS IT POSSIBLE THAT MONTHWISE WAGES PAID ARE EVEN MORE THAN THE MATERIA L USED FOR EXECUTION OF CONTRACT ESPECIALLY THE TYPE OF CONTRA CTS EXECUTED BY THE ASSESSEE, IF NATURE OF MATERIAL USED IS ANY INDICAT ION, WHEN WE EXAMINE THE NATURE OF MATERIAL IS USED BY THE ASSES SEE. ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 19 4.A) LABOUR WAGES OF RS.9,51,300/- HAVE BEEN DECLAR ED AS PAYABLE ON 31.03.2007. THE ASSESSEE IN REPLY TO QUERY NO.10 OF THE LETTER DATED 07.10.2010, DID NOT FURNISH THE BIFURCATION OF MONT HWISE WAGES PAYABLE LEADING TO CUMULATED SUM OF RS.9,51,300/- A ND SIMPLY REPLIED AS PER REPLY FILED ON 24.11.2010 AND FILED THE FOLL OWING LEDGER ACCOUNT:- LABOUR PAYABALE DATE NARRATION DEBIT CREDIT BALANC E 01.04.2008 OPENING BAL. 9,51,300 9,51,300 10.04.2008 CASH 4,78,235/- - 4,73,065 28.04.2008 CASH 4,73,065/- - NIL 9,51,300/- 9,51,300 NIL IS IT POSSIBLE THAT LABOUR WHO EARNS RS.125-175 A D AY CAN WAIT FOR HIS WAGES FOR A MONTH. FROM WHERE WILL HE FILL HIS BELLY WHEN HE IS ALREADY IN THE B.P.L. CATEGORY OF INDIAS POPUL ATION? IS HIS AND HIS FAMILYS SURVIVAL POSSIBLE UNDER THESE CONDITIONS? GENERALLY WAGES ARE PAID EVERY WEEK AND AT THE MOST BIWEEKLY, I AM SURE ASSESSEE IS NOT AS INHUMAN AS TO RENDER THE LABOUR AND THEIR FA MILIES STARVE TO DEATH BY KEEPING THEM WAITING FOR MONTHS TO GET TH EIR PETTY WAGES WHICH ARE HARDLY ENOUGH TO PROVIDE THEM ATTA/CHAWA L/DAL. WAGES PAYABLE AT RS.9,51,300/- ARE TREATED AS FAKE AND BOGUS AND REPRESENT ASSESSEES CONCEALED INCOME AND THIS AMOUNT IS TRE ATED AS ASSESSEES ASSESSABLE INCOME. PENALTY PROCEEDINGS U/S 271(1)(C ) ARE INITIATED ON THIS ISSUE FOR CONCEALMENT OF INCOME. 4.B). THE HUGE VARIATIONS CONFRONTED TO THE ASSESSE E AS PER SHOW CAUSE NOTICED DATED 13.12.2009 ARE FURTHER HORRIFYI NG WHEN THE RATIOS OF MONTH-WISE WAGES W.R.T. MONTH WISE RECEIPTS AS P ER COLUMN 10 OF CHART A ARE ANALYSED. IN THE MONTHS OF MAY, 2007 AND FEB., 2008 THESE WAGES ARE ABOVE 100% OF THE TOTAL CONTRACT RECEIPTS WHICH FACT IS REALLY MIND BOGGLING. THE ASSESSEE HAS FAILED TO GIVE ANY REASONABLE EXPLANATION FOR SUCH VARIATIONS IN THE M ONTHWISE RATIOS. BOOKS OF ACCOUNT ON THIS ACCOUNT ALSO ARE NOT RELIA BLE AT ALL FOR ASCERTAINING THE TRUE AND CORRECT ASSESSABLE INCOME OF THE ASSESSEE AND ARE, THEREFORE, REJECTED U/S 145(3) OF THE ACT AND INCOME IS COMPUTED UNDER THIS SECTION AFTER RESTRICTING THE W AGES TO 35% OF THE CONTRACT RECEIPTS OF RS.2,64,17,811/- WHICH IS ALMO ST EQUAL TO TOTAL ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 20 PURCHASES DECLARED BY THE ASSESSEE. BALANCE OF RS. 27,36,902/- IS DISALLOWED AND TREATED AS ASSESSEES CONCEALED INCO ME. PENALTY PROCEEDINGS U/S 271(1)(C) ARE TO BE INITIATED FOR F URNISHING INACCURATE PARTICULARS OF INCOME ACCOMPANIED BY A CAVALIER ATT EMPT AT CONCEALMENT OF INCOME. ADDITION OF RS.9,51,000/- IS MADE IN PARA 4(A) IS TREATED AS HAVING TELESCOPIC WITH THIS ADDITION OF RS.27,36,902/-. VIDE LETTER DATED 13/12/2010 THE ASSESSEE WAS ASKED TO EXPLAIN AS UNDER: WHILE GOING THROUGH THE BILLS FOR PURCHASES MADE BY YOU DURING THE YEAR IT IS OBSERVED THAT THE FOLLOWING PURCHASES AR E WITHOUT PROPER BILLS AND THESE ARE IN THE SHAPE OF SELF PREPARED VOUCHER AMOUNTING TO RS.4,86,750/- AS PER DETAILS GIVEN BELOW: SELF PREPARED VOUCHERS DATE OF VOUCHER AMOUNT 27.06.2007 44,801/- 27.06.2007 87,388/- 05.07.2007 21,000/- 08.09.2007 13,100/- 13.09.2007 56,774/- 18.09.2007 10,350/- 25.09.2007 10,400/- 17.10.2007 9,487 24.10.2007 16,480/- 17.11.2007 26,520/- 28.11.2007 17,819/- 01.12.2007 5,413/- 01.12.2007 11,310/- 13.12.2007 6393/- 11.02.2008 50,000/- 01.01.2008 9,750/- 04.01.2008 10,499/- 07.01.2008 2,582/- 17.01.2008 3,435/- 18.01.2008 9,375/- ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 21 19.01.2008 12,000/- 31.01.2008 749/- 17.03.2008 19,000/- 23.03.2008 14,125/- 26.03.2008 18,000/- 4,86 ,750/- YOU ARE HEREBY REQUIRED TO SHOW CAUSE WHY THESE SE LF PREPARED VOUCHERS AMOUNTING TO RS.4,86,750/- MAY NOT BE ADDE D BACK TO YOUR INCOME. IN RESPONSE TO WHICH COUNSEL OF THE ASSESSE E STATED THAT ENTIRE DETAILS LIKE BILL NUMBERS, PARTYS NAME AND DATE ET C. HAS BEEN DULY MENTIONED ON EACH VOUCHER. THE BILLS ARE TO BE SHOW N BY US TO THE GOVT. DEPARTMENTS OFFICIALS OR EXCISE & TAXATION D EPARTMENT AND FOR THIS PURPOSE THE BILLS ARE TAKEN OUT FROM THE OFFIC E. IN THE MEANWHILE SOME BILLS ARE MISPLACED AND ARE NOT READILY AVAILA BLE. HOWEVER, MOST OF THE BILLS OUT OF THE ABOVE MENTIONED PURCHA SED BILLS AMOUNTING TO RS.4,86,750/- HAVE BEEN FOUND BY US AN D PHOTOSTAT COPIES THEREOF FILED BEFORE YOUR GOODSELF. HOWEVER, THE ENTIRE MATERIAL PURCHASED BY US IS UTILIZED TOWARDS TO THE EXECUTIO N OF CONTRACTS FOR BUSINESS PURPOSES. THE COUNSEL OF THE ASSESSEE PROD UCED THE COPIES OF BILLS AMOUNTING TO RS.3,81,131/- & BALANCE OF RS.1, 05,619/- TO BE ADDED TO THE INCOME OF THE ASSESSEE. 15. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO WITH REGARD TO REJECTION OF BOOKS OF ACCOUNT, AS HAS BEEN DONE FOR THE ASSESSMENT YEAR 2007-08. THE LD. CIT(A) CONFIRMED THE ACTION OF TH E AO FOLLOWING HIS OWN ORDER FOR THE A.Y. 2007-08 IN THE CASE OF THE ASSES SEE HIMSELF AND CONFIRMED THE SPECIFIC ADDITION. FURTHER, THE LD. CIT(A) AGAI N FOLLOWING HIS ORDER FOR THE A.Y.2007-08 RESTRICTED THE SPECIFIC ADDITION @ 8% OF THE CONTRACT RECEIPTS BEING NET PROFIT AND RESTRICT THE NET PROF IT RATE AT RS.21,79,435/- WHICH RESULTED IN ADDITION OF RS.14,01,358/-. ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 22 16. THE LD. DR AT THE OUTSET, RELIED UPON THE ORDER OF THE A.O. HE ALSO RELIED UPON THE ORDER OF THE LD. CIT(A) EXCEPT THE RESTRICTION OF N.P. RATE OF 12%. 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ISSUE IN THE PRESENT APPE ALS IS IDENTICAL TO THE FACTS IN ASSESSEES AND REVENUES APPEALS FOR THE ASSESS MENT YEAR 2007-08. FOLLOWING OUR OWN ORDER FOR THE ASSESSMENT YEAR 200 7-08 HEREINABOVE BEING ON IDENTICAL FACTS, THE AO IN THE PRESENT APPEAL IS DIRECTED TO DELETE ALL THE SPECIFIC ADDITIONS AND APPLY A NET PROFIT RATE OF 5 % ON CONTRACT RECEIPTS DECLARED BY THE ASSESSEE FOR THE REASONS MENTIONED IN OUR ORDER FOR THE A.Y. 2007-08 (SUPRA). ACCORDINGLY, APPEALS OF THE REVENU E AND ASSESSEE ARE MODIFIED AND ARE PARTLY ALLOWED. 18. AS REGARDS THE VERIFICATION OF RECORD, WE HAV E FOUND THAT THERE WAS A REQUEST ON THE ADMISSION OF ADDITIONAL EVIDENCE BY THE ASSESSEE WHICH IS IN BOTH THE YEARS AND WHICH IS REPRODUCED FOR THE SAK E OF CONVENIENCE AS UNDER: IT IS SUBMITTED THAT AS PER THE GUIDELINES ISSUED BY THE DIRECTORATE OF SYSTEMS, CONTRACTORS WHOSE GROSS RECEIPTS IS MORE T AN ONE CRORE AND NET PROFIT IS LESS THAN 5% OF THE GROSS RECEIPTS OR THOSE FOLLOWING CONTRACT COMPLETION METHOD ARE TO BE SELECTED THRO UGH COMPUTER ASSISTED SCRUTINY (CASS). THE ASSESSING OFFICER TO WHOSE NOTICE THE ABOVE MENTIONED GUIDELINES WERE BROUGHT APPLIED NET PROFIT RATE OF 5% TO GROSS RECEIPTS FOR THE A.Y.2009-10. THE APPEL LANT HAS NOT FILED ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 23 APPEAL AGAINST THAT ORDER BECAUSE LITIGATION IS COS TLY, AGONIZING AND TIME CONSUMING. HOWEVER, THE FACT REMAINS THAT THE APPELLANT HAS ACCEPTED THAT ORDER AND THAT HAS BECOME FINAL. IT IS PRAYED THAT THE ASSESSMENT ORDER MAY BE ADMIT TED AS ADDITIONAL EVIDENCE. SINCE THE ADDITIONAL EVIDENCE CAME INTO T HE POSSESSION OF THE APPELLANT IN THE MONTH OF DECEMBER, 2011 AND IS RELEVANT TO THE ISSUE INVOLVED IN THE ABOVE MENTIONED APPEAL, THE C ROSS OBJECTIONS OF THE APPELLANT AND APPEAL OF THE REVENUE, THEREFORE, IT IS PRAYED THAT THE SAME MAY KINDLY BE ADMITTED AS ADDITIONAL EVIDE NCE. 19. IN THIS REGARD, THE LD. DR ARGUED THAT REQUEST FOR ADMISSION OF ADDITIONAL EVIDENCE HAS BEEN REFERRED WITH RESPECT TO THE ISSUE FOR THE A.Y. 2009-10, WHEREAS THE ISSUE BEFORE THE BENCH IS RELA TING TO THE ASSESSMENT YEARS 2007-08 & 2008-09 AND OUT RIGHTLY THE ADDITIO NAL EVIDENCE CANNOT BE ADMITTED. MOREOVER, SUCH ADDITIONAL EVIDENCE CANNO T HELP THE ASSESSEE IN DECIDING THE ISSUES IN THE IMPUGNED YEAS. THE LD. DR, THEREFORE, PRAYED TO REJECT THE REQUEST OF ADDITIONAL EVIDENCE FILED BY THE ASSESSEE. 20. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERI AL AVAILABLE ON RECORD. WE ARE CONVINCED WITH THE ARGUMENTS MADE BY THE LD. DR THAT REQUEST FOR ADDITIONAL EVIDENCE IS WITH RESPECT TO THE A.Y. 2009-10 WHEREAS THE ISSUES BEFORE US ARE RELATING TO ASSESSMENT YEA RS 2007-08 & 2008-09. MOREOVER, THE ISSUE IN DISPUTE BEFORE US IS ON MERI T, WHICH DOES NOT REQUIRE SUCH EVIDENCE AND THEREFORE, THE REQUEST FOR ADMISS ION OF ADDITIONAL EVIDENCE IS WITHOUT ANY REASON OR PURPOSE AND THE SAME IS REJECTED. ITA NOS. 453 & 471(ASR)/2010 C.O.NO.01(ASR)/2011 ITA NOS.383 & 349(ASR)/2011 24 21. IN THE RESULT, THE APPEALS IN ITA NOS.453(ASR) /2010, 349(ASR)/2011 AND C.O. NO.01(ASR)/2011 OF THE ASSESSEE AND APPEAL S OF THE REVENUE IN ITA NOS. 471(ASR)/2010 & 471(ASR)/2011 ARE PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17TH JANUARY, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17TH JANUARY, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH.ANIL KUMAR PROP. M/S. SIDDHARTH ENT ERPRISES, ADAMPUR, JALANDHAR. 2. THE ITO IV(2), ACIT/DCIT, CIRCLE IV, JALANDHAR 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR