PRAMOD KUMAR AGARWAL, BHARATPUR V. ITO, BHARATPUR

ITA 52/JPR/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 47972 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 24-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 131; 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.52/ JP/2011 ASSESSMENT YEAR 2005-06 PAN: ABYPA 1635 L SHRI PRAMOD KUMAR AGARWAL VS. THE ITO 1, JAWAHAR NAGAR WARD- 3 DHOLPUR BHARATPUR (APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI RAJENDRA AGARWAL DEPARTMENT BY : SHRI D.K. MEENA ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDE R OF THE LD. CIT(A), ALWAR DATED 08-12-2010 FOR THE ASSESSMENT YEAR 200 5-06. 2.1 THE FIRST GROUND OF APPEAL OF THE ASSESSEE IS T HAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE REJECTION OF BOOKS OF ACCOU NTS BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. 2.2 DURING THE COURSE OF PROCEEDING BEFORE US, THE LD. AR HAS NOT PRESSED THIS GROUND OF APPEAL. THEREFORE, THE SAME IS DISMI SSED BEING NOT PRESSED. 3.1 THE SECOND GROUND OF APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ESTIMATION OF NET PROFIT AT 8.75%. 2 3.2 THE ASSESSEE IS A CIVIL CONTRACTOR. BEFORE THE AO, IT WAS SUBMITTED THAT THE ASSESSEE HAS SHOWN PROFIT RATE OF 8.27%. DURING THE YEAR UNDER REFERENCE, THE ASSESSEE HAS EXECUTED THE WORK TO TH E EXTENT OF RS. 1.10 CRORES WHILE IN THE PRECEDING YEAR, THE RECEIPT FROM CONTR ACT WORK WERE AROUND RS. 35.15 LACS. LOOKING TO THE INCREASE IN THE RECEIPTS , IT WAS SUBMITTED BEFORE THE AO THAT THE RATE DISCLOSED BY THE ASSESSEE IS R EASONABLE. THE AO WAS NOT SATISFIED WITH THE REPLY OF THE ASSESSEE AND ACCORD INGLY HE APPLIED THE NET PROFIT RATE OF 9%. 3.3 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE DIRECTED THE AO TO APPLY THE NET PROFIT RATE OF 8.7 5% SUBJECT TO DEPRECIATION AFTER OBSERVING AS UNDER:- 4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSION OF THE ASSESSEE AND CITED CASE LAWS, IT IS FOUND THAT IN THIS LINE OF BUSINESS NET PROFIT DEPENDS ON VARI OUS FACTORS. THE NET PROFIT MAY BE 12% OR EVEN LESS THAN NET PRO FIT SHOWN BY THE ASSESSEE. THE LD. AO HAS POINTED OUT THE DEF ECTS IN LABOUR BILLS AS WELL AS MATERIAL BILLS WHICH WERE S ELF MADE AND PAYMENTS GENERALLY WERE MADE IN CASH. THEREFORE, WH ATEVER RESULTS SHOWN BY THE ASSESSEE CANNOT BE ACCEPTED AS SUCH. THE LD. AO, ESTIMATED THE NET PROFIT ON HIGHER SIDE. TH EREFORE, I RESTRICT THIS ADDITION BY APPLYING NET PROFIT RATE @ 8.75% SUBJECT TO DEPRECIATION ALLOWED. THEREFORE, ASSESSE E GETS RELIEF OF RS. 28,076/-.; 3 3.4 BEFORE US, THE LD. AR STATED THAT RATE OF DIESE L WAS RS. 20.79 PER LITRE WHEN THE WORK TENDER WAS ACCEPTED BY THE CONTRACTEE . AT THE TIME OF EXECUTION OF THE CONTRACT, THE SALE PRICE OF DIESEL WAS TO THE EXTENT OF RS. 28.31 PER LITRE TO RS. 32.82 PER LITRE. IT WAS THER EFORE, SUBMITTED THAT THE RATE SHOWN BY THE ASSESSEE IS REASONABLE. IT WAS FURTHER SUBMITTED THAT NET PROFIT RATE BEFORE DEPRECIATION, INTEREST AND WORK CONTRAC T TAX COMES TO RS. 14,42,701/-WHICH MEANS A RATE OF 12.05% ON THE CONT RACT RECEIPTS. THE NET PROFIT RATE BEFORE DEPRECIATION COMES TO RS. 9,29,0 88/- WHICH GIVES A RATE OF 8.27%. 3.5 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ER OF THE LD. CIT(A). 3.6 WE HAVE HEARD BOTH THE PARTIES. ON THE CREDIT S IDE, THERE ARE OTHER RECEIPTS ALSO AND SUCH RECEIPTS CANNOT BE CONSIDERE D TO BE ARISEN FROM THE INCOME FROM EXECUTION OF CONTRACT DONE DURING THE Y EAR. THERE ARE RECEIPTS IN THE FORM OF BANK INTEREST , REFUND AND PROFIT ON SALE OF FIXED ASSETS. SUCH RECEIPTS ARE NOT SUBSTANTIAL BUT ARE ONLY TO THE EX TENT OF AROUND RS. 7,500/-. IT IS AN ACCEPTED POSITION THAT VOUCHERS MAINTAINED BY THE ASSESSEE ARE NOT SUFFICIENT FOR VERIFYING THE QUANTUM OF EXPENSES DE BITED. THERE IS INCREASE IN DIESEL PRICE AND DUE TO THAT THERE WILL BE FALL IN GROSS PROFIT RATE. IN THE SUCCEEDING YEAR, THE LD. CIT(A) HAS APPLIED THE NET PROFIT RATE OF 8% WHICH 4 WAS REDUCED BY THE TRIBUNAL AND ADDITION OF RS. 50, 000/- WAS UPHELD. WE THEREFORE, FEEL THAT IT WILL BE FAIR AND REASONABLE TO APPLY THE NET PROFIT RATE OF 8.5% AS AGAINST 9% ESTIMATED BY THE AO ON THE CONTR ACT RECEIPTS AND INCLUDING OTHER RECEIPTS AS PART OF THE NET PROFIT ESTIMATED AT THE RATE MENTIONED ABOVE. 4.1 THE LAST GROUND OF APPEAL OF THE ASSESSEE IS T HAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE U/S 68 OF THE ASSESSEE WITH REGARD TO CASH CREDIT OF RS. 8.00 LACS FROM SHRI R.C, JAIN AN D RS. 1.50 LACS FROM SMT. LAVIKA JAIN. 4.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO REQUIRED THE ASSESSEE TO FURNISH THE CONFIRMATION FROM THE CASH CREDITORS. THE CONFIRMATIONS OF CASH CREDITORS EXCEPT THE CREDITS IN THE NAME OF SHRI R.C. JAIN AND SMT. LAVIKA JAIN WERE FILED. BEFORE THE AO , IT WAS SUBMITTED THAT THERE IS NO GOOD RELATION BETWEEN THE ASSESSEE AND THE ABOVE CREDITORS AND THEREFORE, HE REQUESTED THE AO TO CALL FOR NECESSAR Y INFORMATION DIRECTLY FROM THE CREDITORS. THE AO ISSUED SUMMONS U/S 131 O F THE INCOME TAX ACT, 1961 TO THE ABOVE REFERRED TWO CREDITORS BUT THESE SUMMONS WERE NOT COMPLIED WITH. THE AO AGAIN ISSUED THE REMINDERS AN D SUCH REMINDERS WERE RETURNED BACK BY THE POSTAL AUTHORITIES WITH THE RE MARKS THAT THE CREDITORS ARE NOT AVAILABLE IN SPITE OF VARIOUS VISITS AT THE PRE MISES OF THE CREDITORS. THE 5 AO REQUIRED THE ASSESSEE TO FURNISH THE CONFIRMATIO N FROM THE CREDITORS GIVING THEIR COMPLETE ADDRESSES ALONGWITH THEIR PAN , AO, CIRCLE- WARD WHERE THE CREDITORS ARE ASSESSED TO TAX. NO SUCH DE TAILS WERE FILED BY THE ASSESSEE. BEFORE THE AO, THE ASSESSEE FILED AN AFFI DAVIT REGARDING THE ADDRESSES OF THE CREDITORS SINCE THE CASE WAS GOING TO BE BARRED BY LIMITATION. THEREFORE, THE AO MADE THE ADDITION OF RS. 9.50 LACS REPRESENTING THE CASH CREDIT IN RESPECT OF TWO CREDITORS. 4.3 THE LD. CIT(A) CONFIRMED THE ADDITION AFTER OBS ERVING AS UNDER:- 5.3 I HAVE PERUSED THE ASSESSMENT ORDER AS WELL AS SUBMISSION OF THE ASSESSEE, IN THIS CASE , THE ASSESSEE HAS NOT FILED ANY CONFIRMATION FROM THE CA SH CREDITORS. THE LD. AO ISSUED SUMMON U/S 131 FOR VERIFICATION OF THE LOAN BUT WHICH COULD NOT BE SER VED ON GIVEN ADDRESS. THE LD. AO DEPUTED WARD INSPECTOR TO ENQUIRE IN THIS CASE. THERE IS A COPY OF REPORT OF WARD INSPECTOR ON RECORD WHO HAD PERSONALLY GONE TO DELH I ON 06-12-2007 AND SHRI RAM CHANDER JAIN HAS DENIRED TH AT HE IS NOT R.C. JAIN AND ALSO HE IS NOT KNOWN TO AN Y PROMOD KUMAR AGARWAL (ASSESSEE). ANOTHER ENQUIRY WA S CONDUCTED BY THE WARD INSPECTOR ON 09-03-2010. COPY OF THE REPORT IS ON THE RECORD IT SHOWS THAT SHRI RAM CHANDER JAIN REFUSED TO BE R.C. JAIN . HE ALSO DEN IED HAVING BEEN KNOWN TO SOME PROMOD KUMAR AGARWAL. SMT. LAVIKA JAIN PROMISED TO ATTEND THE OFFICE OF T HE 6 ITO, BHARATPUR ON 18-03-2010. THE REMAND REPORT WAS GIVEN TO THE ASSESSEE ON 12-04-2010 WHICH WAS REPLI ED BY THE ASSESSEE. IN BOTH THE CASES THE CASH CREDITO RS NEVER ADMITTED TO BE GIVEN ANY LOAN TO SHRI PRAMOD KUMAR AGARWAL. THE COPY OF BANK ACCOUNT OF OBC ROHINI, NE W DELHI AVAILABLE ON RECORD IS IN THE NAME OF RAM CHA NDER JAIN WHICH REVEALS DEBIT ENTRY OF RS. 4 LAC IN THE MONTH OF MARCH 2005 AND ONE LAC AGAIN IN THE MONTH OF MARCH 2005 IN THE NAME OF PRAMOD KUMAR AGARWAL. EVEN IDENTITY OF PERSON IS ASSUMED TO BE PROVED IN BOTH THE CASES THEN THE CREDITWORTHINESS OF THE CASH CREDITO RS AND GENUINENESS OF THE TRANSACTIONS HAVE NOT BEEN PROVE D BY THE ASSESSEE. THE ASSESSEE HAS NOT DISCHARGED HIS O NUS FULLY. THEREFORE, I CONFIRMED THE ADDITION OF RS. 9 .5 LAC. 4.4 WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE FI LED THE AFFIDAVIT BEFORE THE AO. IN THE AFFIDAVIT, THE ASSESSEE STATED THAT THE CHEQUES ISSUED BY SHRI R.C. JAIN WERE DEPOSITED IN THE BANK ACCOUNT BY SHR I VIMAL PRASAD JAIN WHO IS SON OF SHRI R.C. JAIN. IN THE AFFIDAVIT, IT WAS FURTHER STATED THAT SMT. LAVIKA JAIN IS CHARTERED ACCOUNTANT AND WAS WORKING IN STEEL AUTHORITY OF INDIA LTD., CONNAUGHT PLACE, NEW DELHI. THE ASSESSE E MADE EFFORTS TO GET THE CONFIRMATIONS BUT THESE PERSONS REFUSED TO GIVE CONFIRMATIONS. PAGES 24 TO 25 OF THE PAPER BOOK CONTAIN THE COPY OF THE REP ORT OF THE INSPECTOR. IN THE REPORT, THE INSPECTOR HAS STATED THAT HE HAS MET SH RI VIMAL PRASAD JAIN IN 7 DELHI. SHRI VIMAL PRASAD JAIN ADMITTED THAT THE ASS ESSEE SHRI PRAMOD KUMAR AGARWAL IS HIS BROTHER-IN-LAW. HE ADMITTED THAT SHR I R.C. JAIN IS FATHER AND SMT. LAVIKA JAIN IS WIFE OF HIS BROTHER. SHRI VIMAL PRASAD JAIN ADMITTED VERBALLY THAT ALL THE THREE PERSONS HAS DONE TRANSA CTIONS WITH SHRI PRAMOD KUMAR AGARWAL. SHRI VIMAL PRASAD JAIN ACCEPTED THE SUMMON ISSUED IN HIS NAME BUT HE REFUSED TO ACCEPT THE SUMMONS IN THE NA ME OF SHRI R.C. JAIN AND SMT. LAVIKA JAIN. SHRI VIMAL PRASAD JAIN ADMITT ED THAT REPLY OF THE THREE PERSONS WILL BE SENT TO THE AO THROUGH REGISTERED P OST. THE ASSESSEE ALSO FILED THE COPY OF THE ELECTORAL LIST TO SHOW THAT T HE CREDITORS WERE RESIDING AT THE ADDRESS GIVEN BY HIM. THUS THE ASSESSEE HAS FIL ED THE EVIDENCES WHICH WERE AVAILABLE WITH HIM AND THE EVIDENCES WHICH HE COULD COLLECT. IF THE CREDITORS WERE NOT COOPERATING WITH THE ASSESSEE TH EREFORE, THE ASSESSEE REQUESTED THE AO TO ISSUE SUMMONS. THE INSPECTOR WH O VISITED DELHI ALSO GAVE THE REPORT WHICH SHOWED THAT SHRI VIMAL PRASAD JAIN ADMITTED THAT THE CREDITORS ENTERED INTO THE TRANSACTION WITH THE ASS ESSEE. THE HON'BLE APEX COURT IN THE CASE OF CIT VS. ORISSA CORPORATION (P) 159 ITR 78 HELD THAT FINDING OF THE TRIBUNAL IN DELETING THE CASH CREDIT S CANNOT BE SAID AS UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE. I N THAT CASE, THE ASSESSEE FILED THE CONFIRMATIONS OF THE CREDITORS AND GAVE T HE NAMES AND ADDRESSES OF THE CREDITORS. THE AO ISSUED THE SUMMONS AND THE SU MMONS WERE RETURNED 8 BACK WITH THE REMARKS FROM THE POSTAL AUTHORITIES A S LEFT. THE REVENUE THEREAFTER DID NOT MAKE ANY EFFORTS TO EXAMINE THE SOURCE OF INCOME OF THE CREDITORS TO FIND OUT WHETHER THEY WERE CREDITWORTH Y. HENCE, THE ADDITION IN THE HANDS OF THE ASSESSEE WAS DELETED. THE REVENUE CANNOT BY MERELY REJECTING THE GOOD EXPLANATION UNREASONABLY TO CONF RONT ALL GOOD PROOF INTO NO PROOF. THE ASSESSEE HAS FILED THE PHOTOSTAT COPY OF THE RECEIPTS OF THE PAY IN SLIP. THE CHEQUES HAVE BEEN DEPOSITED IN THE BAN K ACCOUNT OF THE ASSESSEE AT DELH. IT IS NOT THE CASE OF THE REVENUE THAT PAY IN SLIPS ARE IN THE HANDWRITING OF THE ASSESSEE. WE THEREFORE, HOLD THA T THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 9.50 LA CS AS THE ASSESSEE HAS PLACED ALL THE EVIDENCES AVAILABLE WITH HIM. THE RE VENUE HAS NOT BEEN ABLE TO COLLECT ANY MATERIAL EVIDENCE TO SUGGEST THAT TH E CREDITORS WERE NOT CREDITWORTHY. THE ASSESSEE IN HIS AFFIDAVIT HAS STA TED THAT THE CHEQUES WERE DEPOSITED IN HIS BANK ACCOUNT BY SHRI VIMAL PRASAD JAIN THOUGH CHEQUES WERE ISSUED FROM THE ACCOUNT OF SHRI R.C. JAIN. SHR I VIMAL PRASAD JAIN WHEN CONTACTED BY THE INSPECTOR ADMITTED SUCH TRANSACTIO NS. IF ONE CONSIDERS THE HUMAN PROBABILITY, IT IS CLEAR THAT CASH CREDITS CA NNOT BE CONSIDERED AS INCOME OF THE ASSESSEE. THE EXPLANATION GIVEN BY TH E ASSESSEE CANNOT BE CONSIDERED AS UNSATISFACTORY. WE THEREFORE, DELETE THE DISALLOWANCE OF RS. 9.50 LACS. 9 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30-06 -2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 30/06/2011 *MISHRA COPY FORWARDED TO :- 1. SHRI PARMOD KUMAR AGARWAL, DHOLPUR 2. THE ITO, WARD- 3, BHARATPUR 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO.52/JP /11) A.R, ITAT, JAIPUR 10 11