ITO, BHIWADI V. PNG DETECTIVE AND SECURITY PVT. LTD., BHIWADI

ITA 50/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5144 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 16-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: P C PARWAL CA DHK
• Keywords: Corroborative evidences
• Section: 43B; 145

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 HKKXPUN] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF;D LN L; DS LE{K BEFORE:SHRI BHAGCHAND, AM & SHRI LALIET KUMAR, J M VK;DJ VIHY LA-@ ITA NO. 50/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 THE ITO WARD- BHIWADI (STATIONED AT ALWAR) CUKE VS. M/S. PNG DETECTIVE AND SECURITY (P) LTD. E-17, GANPATI PLAZA, PHOOL BAGH RIICO IND AREA, BHIWADI, DISTT. ALWAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AADCP 1733H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT C.O. NO. 06/JP/2015 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 50/JP/2015) FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 M/S. PNG DETECTIVE AND SECURITY (P) LTD. E-17, GANPATI PLAZA, PHOOL BAGH RIICO INDL. AREA, BHIWADI, DISTT. ALWAR CUKE VS. THE ITO WARD- BHIWADI (STATIONED AT ALWAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AADCP 1733H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA, ADDL.CIT -DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL, CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 04/07/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 05 /07/2016 VKNS'K@ ORDER PER BHAGCHAND, AM THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER O F THE LD. CIT(A), ALWAR DATED 12-11-2014 FOR THE ASSESSMENT YEAR 2011-12. THE ASSESSEE HAS FILED THE CROSS OBJECTION. 2.1 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. ITA NO. 50/JP/2015 THE ITO , WARD- BHIAWDI VS. M/S. PNG DETECTIVE & SE CURITY (P) LTD., ALWAR . 2 1. THAT THE LD. CIT(A), ALWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN RESTRICTING THE ADDITION OF RS. 46,48,353/- TO RS. 34,03,740/- MADE BY THE AO BY INVOKING THE PROVISIONS OF SECTIO N 145(3) OF THE ACT. 2. THAT THE LD. CIT(A), ALWAR HAS ERRED IN LAW AS W ELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN RESTR ICTING THE DISALLOWANCE OF RS. 1,17,897/-TO RS. 8,003/- MADE B Y THE AO ON ACCOUNT OF U/S 2(24)(X) READ WITH SECTION 36(1) (VA) OF THE I.T. ACT, 1961. 2.2 THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN IT S C.O.. 1. THE LD. CIT(A), ALWAR HAS ERRED ON FACTS AND I N LAW IN CONFIRMING THE APPLICATION OF SECTION 145(3) . HE HAS FURTHER ERRED IN CONFIRMING THE TRADING ADDITION OF RS. 34,03,740/-BY APPLYING NET PROFIT RATE OF 6% ON THE TURNOVER DECLARED BY THE ASSESSEE AS AGAINST NET PROFIT RATE OF 0.49% DECLARED BY THE ASSESSEE. 2. THE LD. CIT(A), ALWAR HAS ERRED ON FACTS AND IN LAW IN CONFIRMING DISALLOWANCE OF RS. 8,003/- OUT O F RS. 1,17,897/- MADE BY AO ON ACCOUNT OF DELAY IN DEPOS IT OF EMPLOYEES CONTRIBUTION TO ESI /PF. 3.1 APROPOS GROUND NO. 1 OF THE REVENUE AND GROUND NO. 1 OF THE C.O. OF THE ASSESSEE WHEREIN BRIEF FACTS OF THE CAS E ARE THAT THE RETURN OF INCOME IN THIS CASE WAS E-FILED ON 29-09-2011 BY TH E ASSESSEE DECLARING TOTAL INCOME AT RS. 3,00,640/-. THE CASE OF THE ASS ESSEE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTICE U/S 143(2) OF THE A CT WAS ISSUED ON THE ASSESSEE ON 01-08-2012 WHICH WAS DULY SERVED ON THE ASSESSEE. THE LD. AR OF THE ASSESSEE AND THE DIRECTOR OF THE ASSESSEE COMPANY ATTENDED THE ASSESSMENT PROCEEDINGS ON 22-08-2012 AND THE CASE W AS ADJOURNED SINE ITA NO. 50/JP/2015 THE ITO , WARD- BHIAWDI VS. M/S. PNG DETECTIVE & SE CURITY (P) LTD., ALWAR . 3 DIE. THE AO GAVE VARIOUS OPPORTUNITIES TO MAKE COMP LIANCE OF THE DIRECTIONS AND NOTICES TO THE ASSESSEE COMP ANY BUT NONE ATTENDED THE PROCEEDINGS TILL THE DATE OF 28-01-2014. THE AO OBSERVED THAT ASSESSEE HAS NEITHER PRODUCED THE BOOKS OF ACCOUNT NO ANY BILLS/ VOUCHERS TOWARDS THE EXPENSE WHICH WERE VITAL FOR THE COMPLE TION OF THE ASSESSMENT BY HIM. HOWEVER, THE ASSESSEE PRODUCED O NLY PHOTOCOPY OF AUDIT REPORT. THE AO FURTHER OBSERVED THAT IN AUDIT REPORT AND ITR-FILED, THE ASSESSEE HAS SHOWN RECEIPTS OF RS. 6,17,39,658/ -. THE AO FURTHER OBSERVED THAT ASSESSEE COMPANY IS A PRIVATE LIMITED REGISTERED UNDER THE COMPANIES, 1956 WHICH IS MAINLY ENGAGED IN THE BUSI NESS OF DETECTIVE SERVICE AND SUPPLY OF MANPOWER TO VARIOUS PRIVATE I NSTITUTIONS AND GOVT. UNDERTAKINGS LIKE GUARDS, GUNMAN, LABOUR FOR FACTO RIES/ INDUSTRIES/ HOTELS/ RESIDENTIAL BUNGALOWS/ BUILDERS ETC. THE AO OBSERVE D THAT THE TURNOVER /WORK CONTRACT RECEIPTS OF THE ASSESSEE IS AMOUNTIN G TO RS. 6,17,39,658/-. THE AO OBSERVED THAT IN THE ABSENCE OF BOOKS OF ACC OUNT / BILLS/ VOUCHERS/ EVIDENCE, HE HAD NO OTHER ALTERNATIVE EXC EPT TO MAKE ASSESSMENT AS PER BEST JUDGMENT ON THE BASIS OF MAT ERIALS AVAILABLE ON RECORD. THE ASSESSEE HAS NOT PROVIDED THE BOOKS OF ACCOUNT AND SUPPORTING DOCUMENTS TO JUSTIFY THE CLAIMED EXPENSE S AND THE AO HAS NO OTHER ALTERNATIVE EXCEPT TO REJECT THE BOOKS OF AC COUNT OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T. THE AO THUS, IN ITA NO. 50/JP/2015 THE ITO , WARD- BHIAWDI VS. M/S. PNG DETECTIVE & SE CURITY (P) LTD., ALWAR . 4 VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CA SE, MADE AN ADDITION OF RS. 46,38,533/- AFTER INVOKING THE PROV ISIONS OF SECTION 145(3) OF THE ACT AND APPLIED THE NET PROFIT RATE O F 8% ON THE DECLARED TURNOVER OF RS. 6,17,39,658/- FOR THE PERIOD UNDER CONSIDERATION. 3.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R BEFORE THE LD. CIT(A) WHO HAS APPLIED THE NET PROFIT RATE OF 6% O N THE TOTAL RECEIPTS OF RS. 6,17,39,658/- AND CONFIRMED THE ADDITION OF RS. 34,03,740/- BY OBSERVING AS UNDER:- 4.5 HAVING CONSIDERED THE MATERIAL PLACED ON RECORD, I FIND THAT APPELLANT HAS FAILED TO PRODUCE THE BOOKS OF ACCOUNT OR VOUCHERS OR BILLS OR OTHER DOCUMENTS ETC. BOTH AT THE STATE OF ASSESSMENT AS WELL AS IN THE COURSE OF APPELLATE PROCEEDINGS. THE BUSINESS MAY BE GOING THROUGH A BA D PHASE BUT THAT CANNOT BE THE EXCUSE FOR NOT PRODUCING THE BOOKS OF ACCOUNTS OR OTHER SUPPORTING EVIDENCE. THEREFORE, I UPHOLD THE ACTION OF THE AO IN INVOKING THE PROVISION OF S ECTION 145 OF THE I.T. ACT AFTER REJECTING THE DECLARED RE SULTS. HOWEVER, NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO IN SUPPORT OF ADOPTION OF 8% AS THE N.P. RATE FOR M AKING THE BEST JUDGEMENT ASSESSMENT. VARIOUS COURTS HAVE UPHE LD THE PRINCIPLE THAT THE BEST GUIDE FOR WORKING OUT THE P ROFITS OF A BUSINESS IN THE ABSENCE OF ACCOUNTS AND SUPPORTING VOUCHERS COULD BE THE BEST HISTORY OF THE BUSINESS ITSELF. T HUS, CONSIDERING ALL THESE FACTORS, I HOLD THAT IT WOULD BE JUST AND FAIR TO APPLY 6% AS THE N.P. RATE ON THE TOTAL RECE IPTS OF RS. 6,17,39,658/- WHICH COMES TO NET PROFIT OF RS. 37,0 4,380/-. AFTER REDUCING THE NET PROFIT OF RS. 3,00,640/- I.E . THE PROFIT WHICH HAS BEEN DECLARED IN THE RETURN, THE NET ADDI TION WOULD BE RS. 34,03,740/-. THE APPLICATION OF 6% N.P. RATE IS FAIR CONSIDERING THE PAST HISTORY OF PROFITS DECLARED BY THE COMPANY, AS NO BOOKS OF ACCOUNT FOR THIS YEAR OR AN Y SUPPORTING VOUCHERS COULD BE PRODUCED. ACCORDINGLY, I CONFIRM THE ADDITION OF RS. 34,03740/- OUT OF THE T OTAL ITA NO. 50/JP/2015 THE ITO , WARD- BHIAWDI VS. M/S. PNG DETECTIVE & SE CURITY (P) LTD., ALWAR . 5 ADDITION OF RS. 46,38,533/- MADE BY THE AO ON ESTIMATE BASIS UNDER THIS HEAD. 3.3 NOW THE REVENUE IS REVENUE BEFORE US AGAINST TH E ORDER OF THE LD. CIT(A) FOR RESTRICTING THE ADDITION OF RS. 46,38, 533/- TO RS. 34,03,740/- BY GIVING RELIEF OF RS. 12,34,793/- TO THE ASSESSEE . 3.4 THE ASSESSEE IS IN C.O. BEFORE US AGAINST THE ORDER OF THE LD. CIT(A) FOR CONFIRMING THE ADDITION OF RS. 34,03,74 0/- BY APPLYING THE NET PROFIT RATE OF 6% ON THE TURNOVER DECLARED BY THE ASSESSEE AS AGAINST NET PROFIT RATE OF 0.49%. 3.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS OBSERVED FROM THE RECORD S THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING MAN POWER LIKE SECURITY GUARDS AND WORKERS TO COMPANIES/ OFFICES IN BHIWADI . DURING ASSESSMENT PROCEEDINGS, THE AO REQUIRED THE ASSESSEE TO PRODUC E THE BOOKS OF ACCOUNT AND BILLS / VOUCHERS PERTAINING TO THE EXPE NSES CLAIMED. THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN THE RECEIPTS O F RS. 6,17,39,658/-BUT THE ASSESSEE HAS NOT SUBMITTED THE DETAILS AS DESIR ED BY THE AO LIKE BOOKS OF ACCOUNT AND BILLS/ VOUCHERS. IN THE ABSENCE OF THESE DETAILS, THE AO HAD NO OTHER ALTERNATIVE EXCEPT TO INVOKE THE PROVI SIONS OF SECTION 145(3) OF THE ACT AND SIMULTANEOUSLY ADOPTING THE FAIR AND REASONABLE APPROACH, APPLIED THE NET PROFIT RATE OF 8% ON TOTAL TURNOVER OF RS. 6,17,39,658/- ITA NO. 50/JP/2015 THE ITO , WARD- BHIAWDI VS. M/S. PNG DETECTIVE & SE CURITY (P) LTD., ALWAR . 6 WHICH COMES TO THE EXTENT OF RS. 49,39,173/-. THE A O OBSERVED THE FINANCIAL STATEMENT OF THE ASSESSEE IN WHICH THE A SSESSEE HAS DECLARED NET PROFIT OF RS. 3,00,640/- FROM ITS BUSINESS ACTIVITI ES. THE AO THUS REDUCED THE SAME TO RS. 46,38,533/- (RS. 49,39,173 MINUS RS . 3,00,640). THE AO THUS FINALLY MADE AN ADDITION OF RS. 46,38,533/- AN D ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE LD. CIT(A) CONSIDER ING ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE REDUCED THE NET PROFIT RA TE TO 6% AND CONFIRM THE ADDITION OF RS.34,03,740/- OUT OF TOTAL ADDITI ON OF RS.46,38,533/-. IT IS SEEN THAT THE ASSESSEE WAS IN THE BUSINESS OF PR OVIDING OF MANPOWER SINCE 2003. THE ASSESSEE HAD FILED ITS RETURN OF IN COME DECLARING INCOME OF RS. 3,00,640/-. THE ASSESSEE HAD TO CLOSE DOWN I TS BUSINESS DUE TO LOSS IN THIS LINE OF BUSINESS AND THE ASSESSEE HAD SUFFE RED LOSS DURING THE ASSESSMENT YEAR 2011-12. DURING THE COURSE OF HEARI NG THE LD. AR OF THE ASSESSEE HAS DRAWN OUR ATTENTION TO FINANCIAL STATE MENTS OF THE ASSESSEE AS UNDER:- FINANCIAL YEAR 2008-09 2009-10 RECEIPTS 42972622 45200435 NET PROFIT 1738803 976559 % NET PROFIT RATE 4.05 2.16 IT IS SEEN THAT THE ASSESSEE HAS SHOWN NET LOSS OF RS. 95,711/ DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS ADMITTED THAT IT HAS NOT PRODUCED THE BOOKS OF ACCOUNT BEFORE THE AO AS WELL AS BEFORE THE LD. ITA NO. 50/JP/2015 THE ITO , WARD- BHIAWDI VS. M/S. PNG DETECTIVE & SE CURITY (P) LTD., ALWAR . 7 CIT(A). THE LD. CIT(A) HAS HOWEVER, REDUCED THE NET PROFIT RATE FROM 8% TO 6%. WE FEEL THAT CONSIDERING THE PAST HI STORY OF THE ASSESSEE I.E. FOR THE IMMEDIATELY PRECEDING TWO YEARS, THE NET PROFIT RATE OF THE ASSESSEE SHOULD BE ON AVERAGE BASIS WHICH COMES TO 3.10% (4.05 PLUS 2.16 = 6.21 DIVIDE BY 2 = 3.10%). IN VIEW OF TAKING ALL THE POSSIBLE CONSIDERATION, IT WILL BE FAIR AND REASONABLE TO ES TIMATE THE NET PROFIT RATE OF 3.10% ON THE TOTAL TURNOVER OF THE ASSESSEE. TH E AO IS DIRECTED TO CALCULATE THE SAME AND MAKE ADDITION ACCORDINGLY. H ENCE, THE GROUND NO. 1 OF THE REVENUE IS DISMISSED AND THE GROUND NO . 1 OF THE C.O. OF THE ASSESSEE IS PARTLY ALLOWED. 4.1 APROPOS GROUND NO. 2 OF THE REVENUE AND GROUND NO. 2 OF THE C.O. OF THE ASSESSEE WHEREIN THE AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE AMOUNTING TO RS. 1,17,897/- ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEES CONTRIBUTION TO ESI AND PF. THE AO OBSERV ED THAT THE ACTUAL DATE OF PAYMENT IS AFTER THE DUE DATE PRESCRIBED UN DER THE RESPECTIVE ACTS. 4.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ADDITION OF RS. 8,003/ - OUT OF THE TOTAL ADDITION OF RS. 1,17,897/- MADE BY THE AO ON THIS A CCOUNT BY OBSERVING AS UNDER:- 4.9 IN VIEW OF THE ABOVE FACTS I DO NOT FIND ANY JUSTIFICATION IN THE ORDER OF THE AO FOR MAKING AN ADDITION ON ITA NO. 50/JP/2015 THE ITO , WARD- BHIAWDI VS. M/S. PNG DETECTIVE & SE CURITY (P) LTD., ALWAR . 8 ACCOUNT OF THE PAYMENTS MADE BEFORE THE DUE DATE OF FILING OF INCOME TAX RETURN OF THE COMPANY. ACCO RDINGLY, I CONFIRM AN ADDITION OF RS. 8,003/- OUT OF THE TOTAL ADDITION OF RS. 1,17,897/- MADE BY THE AO ON THIS ACCOUNT. 4.3 NOW THE REVENUE IS REVENUE BEFORE US AGAINST TH E ORDER OF THE LD. CIT(A) FOR RESTRICTING THE DISALLOWANCE OF RS. 1,1 7,897/- TO RS. 8,003/- AND THE ASSESSEE IS FOR CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS. 8,003/- . 4.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FEEL WHERE PF AND/OR EPF, C PF, GPF, ETC., WAS PAID AFTER THE DUE DATE UNDER THE RESPECTIVE ACTS B UT BEFORE FILING OF RETURN OF INCOME U/S 139(1), IT COULD NOT BE DISALL OWED U/S 43B OR U/S 36(1)(VA).. THE HON'BLE JURISDICTIONAL HIGH COURT I N THE FOLLOWING CASES HAS ALLOWED THE CLAIM OF THE ASSESSEE AS TO LATE D EPOSIT OF PF / ESI BUT THE SAME HAS BEEN DEPOSITED BEFORE THE DUE DATE OF FILING OF THE INCOME- TAX RETURN. (I) CIT VS. STATE BANK OF BIKANER & JAIPUR (2014) 3 63 ITR 70 (RAJ) (HC) (II) CIT VS. JAIPUR VIDYUT VITRAN NIGAM LTD. (2014) 363 ITR 307 (RAJ.) (HC) (III) CIT VS. UDAIPUR DUGDH UTPADAK SAHAKARI SANGH LTD. (2014) 366 ITR 163 (RAJ.) (HC) ITA NO. 50/JP/2015 THE ITO , WARD- BHIAWDI VS. M/S. PNG DETECTIVE & SE CURITY (P) LTD., ALWAR . 9 4.5 IN VIEW OF THE ABOVE DELIBERATIONS AND CONSIDER ING THE DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT, THE GROUND NO. 2 OF THE REVENUE IS DISMISSED AND GROUND NO. 2 OF THE C.O. O F THE ASSESSEE IS ALLOWED. 5.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND C.O. OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/07/20 16 SD/- SD/- YFYR DQEKJ HKKXPUN (LALIET KUMAR) (BHAGCHAND ) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 05/07/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ITO, WARD- BHIWADI 2. IZR;FKHZ@ THE RESPONDENT-M/S. PNG DETECTIVE AND SECURITY (P) LTD., BHIWADI 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. 50/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR