M/s Unicon Builders & Contractors, Ludhiana V. DCIT, Ludhiana

ITA 521/CHANDI/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95615 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 08-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Depreciation; Additional evidence; Wrong claim; Revised return
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO.521/CHD/2013 ASSESSMENT YEAR:2008-09 UNICON BUILDERS & CONTRACTORS., VS. THE DCIT PLOT NO. 4, VALLABH NAGAR CIRCLE VII RAJPURA ROAD LUDHIANA LUDHIANA PAN NO. AAAFU8801B (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SUDHIR SEHGAL RESPONDENT BY : SH. MANJIT SINGH DATE OF HEARING : 17/08/2015 DATE OF PRONOUNCEMENT :16/10/2015 ORDER PER ANNAPURNA MEHROTRA A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-II, LUDHIANA, DT. 11/01/2013. 2. BRIEF FACTS ARE THAT THE ASSESSEE IS DERIVING IN COME FROM BUSINESS OF CIVIL CONTRACTOR, AND RETURN DECLARING INCOME OF RS. 2,85 ,950/- WAS FILED FOR THE IMPUGNED AY . THEREAFTER A REVISED RETURN WAS FILED DECLARING AN INCOME OF RS. 5,34,780/-. ASSESSMENT WAS FRAMED U/S 143(3) AT AN INCOME OF RS. 61,22,310/- VIDE ORDER DT. 28/12/2010, AFTER MAKING THE FOLLOWI NG ADDITIONS / DISALLOWANCES: 1. ON ACCOUNT OF CURRENT LIABILITIES - 45,66,440/ - 2. ON ACCOUNT OF WRONG CLAIM OF DEPRECIATION - 2,51 ,250/- 3. ON ACCOUNT OF UNDISCLOSED RECEIPTS - 7,69,837/- 3. LD. CIT(A) VIDE HIS ORDER DT. 11/01/2013, UPHELD THE ORDER OF THE AO. AGGRIEVED BY THE SAME, THE ASSESSEE FILED THE PRESE NT APPEAL BEFORE US, TAKING THE FOLLOWING GROUNDS: 2. THAT THE LEARNED CIT(A) HAS ERRED IN CONFIRMING ADD ITION OF RS. 45,66,440/- MADE BY THE ASSESSING OFFICER IN RESPECT OF CURRENT LIABILI TIES AS PER DETAIL MENTIONED AS PER PARA 4.2 OF HIS ORDER. 2 3. THAT THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERIN G THAT NO SUFFICIENT AND REASONABLE OPPORTUNITY WAS AFFORDED TO THE ASSESSEE TO FILE EV IDENCES AND DOCUMENTS IN SUPPORT OF CURRENT LIABILITIES OF RS. 45,66,640/-. 4. THAT THE LEARNED CIT(A) HAS ALSO ERRED IN NOT ADMIT TING ADDITIONAL EVIDENCES UNDER RULE 46A IN THE FORM OF CERTAIN CASH VOUCHERS IN OR DER TO PROVE IDENTITY AND GENUINENESS OF EXPENSES PAYABLE. 5. THAT THE LEARNED CIT(A) HAS ERRED IN UPHOLDING ADDI TION OF RS. 7,69,837/- AS PER PARA 6 OF THE ORDER. 6. THAT THE LD. CIT HAS ERRED IN CONFIRMING THE DISALL OWANCE ON ACCOUNT OF DEPRECIATION ON MACHINERY TO THE TUNE OF RS. 2,51,250/-. 7. THAT WITHOUT PREJUDICE TO THE GROUNDS OF APPEAL IT IS SUBMITTED THAT IN THE CASE OF CONTRACTOR IF THE RESULTS AS PER BOOKS OF ACCOUNTS ARE NOT ACCEPTED, THEN AT BEST, THE PROFIT RATE OF 8% TO 10% IS APPLIED ON THE TOTAL RE CEIPTS. IN THE PRESENT CASE, AFTER CONSIDERING THE ABOVE ADDITIONS, THE PROFIT RATE CO MES TO 15.26%, WHICH IS HIGHLY EXCESSIVE. THUS, AT BEST PROFIT RATE OF 8% SHOULD H AVE BEEN APPLIED ON THE TOTAL RECEIPTS OF RS. 48464353/- (-) RS. 8344947/- (MATER IAL SUPPLIED BY GOVT.) = RS. 40119406/- AND WHICH WOULD COVER ALL ADDITIONS. 4. GROUND NO. 4,5,6, & 7 HAVE NOT BEEN PRESSED BEFO RE US AND ARE THEREFORE TREATED AS DISMISSED. 5. IN GROUND NO. 2 & 3 THE ASSESSEE HAS AGITATED TH E ADDITION OF RS. 45,66,440/- MADE IN RESPECT OF CURRENT LIABILITIES. 6. BRIEFLY STATED DURING ASSESSMENT PROCEEDINGS IT WAS FOUND THAT ASSESSEE HAD SHOWN EXPENSES PAYABLE UNDER THE HEAD CURRENT L IABILITIES AMOUNTING TO RS. 45,66,440/- AS FOLLOWS: SR. NO. PARTICULARS AMOUNT 1. BRICKS PAYABLE 9,12,500/- 2. BAJRI, ZEERA PAYABLE 7,00,890/- 3. EARTH WORK / SAND PAYABLE 6,28,000/- 4. RORI PAYABLE 10,14,850/- 5. GRAVEL PAYABLE 3,96,000/- 6 STONE PAYABLE 9,14,200 TOTAL 45,66,440/- ON BEING ASKED TO FURNISH REQUISITE DETAILS THE ASS ESSEE FURNISHED CERTAIN CERTIFICATES FORM VARIOUS TRUCK UNIONS, DRIVERS AND TRUCK OWNERS AND ALSO PRODUCED BOOKS OF ACCOUNTS. THE AO FOUND THAT NO PA RTY-WISE ACCOUNTS OF THE EXPENSES PAYABLE WERE MAINTAINED. THE AO ALSO NOTED THAT THE ASSESSEE HAD CLAIMED THAT THESE EXPENSES HAD BEEN PAID SUBSEQUEN TLY IN CASH WITH EACH PAYMENT VOUCHER BEING LESS THAN 20,000/- . THE AO T HEREFORE HELD THAT THE CLAIM OF THE ASSESSEE WITH REGARD TO EXPENSES PAYABLE WAS NOT A GENUINE CLAIM. 7. DURING APPELLATE PROCEEDINGS THE ASSESSEE FILED A REQUEST TO PRODUCE ADDITIONAL EVIDENCE IN THE FORM OF CASH VOUCHERS TO PROVE THE IDENTITY AND GENUINENESS OF EXPENSES PAYABLE, WHICH WAS REJECTED BY THE LD. CIT(A). THE ASSESSE FURTHER PLEADED THAT AS PER THE PAST HISTOR Y OF THE ASSESSE, THE EXPENSES CLAIMED ARE GENUINE AND EVEN OTHERWISE THE ASSESSEE PLEADED THAT THE PROFIT 3 PERCENTAGE AT WHICH THE ASSESSEE WAS ASSESSED IN TH E PAST SHOULD HAVE BEEN CONSIDERED. 8. LD. CIT(A) REJECTED THE CONTENTION OF THE ASSESS EE AND HELD THAT THE ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF ITS CLAIM SINCE IT HAD NEITHER MAINTAINED DETAILS OF NAMES AND ADDRESSES OF PERSON S TO WHOM THE PAYMENTS WAS MADE NOR HAD IT BEEN ABLE TO FURNISH DETAILS OF PERSONS TO WHOM THE PAYMENTS WERE MADE. LD. CIT(A) FURTHER HELD THAT TH E IMPUGNED PAYMENTS HAVING BEEN MADE TO CONTRACTOR AND NO TAX HAVING BE EN DEDUCTED ON THE SAME, WERE LIABLE TO BE DISALLOWED U/S 40A(IA) OF T HE ACT. 9. BEFORE US THE LD. AR STATED THAT THE DISALLOWANC E MADE WAS INCORRECT SINCE THE AFORESTATED ADDITIONS HAD INCREASED THE N ET PROFIT RATE OF THE ASSESSEE TO 15.26% WHICH WAS HIGHLY EXCESSIVE AND AT TOTAL V ARIANCE WITH THE HISTORY OF THE ASSESSEE. THE AR PRODUCED A CHART SHOWING N.P. AND G.P. OF THE ASSESSEE FOR THE PRECEDING AND SUCCEEDING ASSESSMENT YEARS A ND PLEADED THAT A REASONABLE G.P. RATE, CONSIDERING THE HISTORY OF TH E ASSESSEE SHOULD BE APPLIED TO DETERMINE THE PROFIT OF THE ASSESSEE. 10. LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF THE LD. CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE DOCUMENTS PLACED BEFORE US. 12. WE FIND THAT THE EXPENSES DISALLOWED PERTAIN TO PURCHASE OF BRICKS, BAJRI, ZEERA, SAND, RARI, GRAVEL & STONE. THE ASSESSEE BEI NG ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION, UNDISPUTEDLY, THESE EXPENSES HA VE TO BE INVARIABLY INCURRED. IT IS ALSO COMMON KNOWLEDGE THAT MOST OF THE TIME SUCH PURCHASES ARE MADE FROM PARTIES BELONGING TO THE UNORGANIZED SECTOR. T HE MODUS OPERANDI OF DEALING WITH SUCH PARTIES IS DIFFERENT FROM THAT IN DEALING WITH THE ORGANIZED SECTOR, IN THE MANNER THAT PURCHASES ARE MADE FROM THEM WITHOUT GOING THROUGH THE PROCESS OF PLACING ORDERS AND IN MOST O F THE CASES KACCHA BILLS ARE RAISED AGAINST WHICH CASH PAYMENTS ARE MADE ON DELI VERY. THE DEALING WITH THE SUPPLIERS OF SUCH MATERIALS ARE ALSO NOT ON A REGUL AR BASIS, BUT DEPENDS UPON AVAILABILITY OF MATERIAL. IN SUCH CIRCUMSTANCES IT IS NORMAL FOR ASSESSEE TO NOT MAINTAIN PARTYWISE ACCOUNTS BUT INSTEAD CREDIT THE AMOUNT PAYABLE TO EXPENSE PAYABLE AMOUNT, SQUARING OFF THE SAME ON PAYMENT BE ING MADE TO THEM, GENERALLY IN CASH. HAVING SAID SO, IT ALSO CANNOT BE DENIED THAT THE ONUS OF PROVING THE CLAIM OF EXPENSES INCURRED BY AN ASSESS EE LIES ON THE ASSESSEE ITSELF IN THE ABSENC OF WHICH THE EXPENSES ARE LIABLE TO B E DISALLOWED. 4 13. IN THE BACKDROP OF THE ABOVE DISCUSSION, WE FIN D THAT THOUGH THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS OF PROVING ITS CLA IM OF INCURRING THE IMPUGNED EXPENSES, YET IN THE LIGHT OF THE PRACTICALITIES OF DOING THE BUSINESS IT CANNOT BE DENIED THAT THE ASSESSEE MUST HAVE INCURRED THESE E XPENSES. 14. MOREOVER WE FIND THAT THE NET PROFIT OF THE ASS ESSEE AFTER MAKING THE AFORESTATED DISALLOWANCE COMES TO 15.25%, WHICH IS HIGHLY IMPROBABLE IN THIS LINE OF BUSINESS. TAKING A HOLISTIC VIEW OF THE MATTER AND IN THE INTEREST OF JUSTICE WE HOLD THAT THE BEST COURSE OF ACTION IN SUCH CIRCUMS TANCES IS TO COMPARE THE PROFITS OF THE ASSESSEE WITH THOSE IN SIMILAR LINE OF BUSINESS OR BY ANY OTHER REASONABLY JUSTIFIED METHOD. SINCE NO COMPARABLE IN STANCES HAVE BEEN PRODUCED BEFORE US, EXCEPT THE PAST AND FUTURE HIST ORY OF THE ASSESSEE HIMSELF, WE CONSIDER IT FIT TO RELY UPON THE SAME FOR COMPAR ISON WITH THE RESULTS OF THE IMPUGNED ASSESSMENT YEAR . THE HONBLE DELHI HIGH COURT HAS UPHELD THE SAME VI EW ON IDENTICAL SET OF FACTS IN THE CASE OF CIT-XII VS. SUBODH GUPTA [2015 ]229 TAXMAN 367 (DELHI) BY HOLDING: THE DIFFICULTY IN THE PRESENT CASE IS THAT THE AS SESSING OFFICER DID NOT CONDUCT ANY INQUIRY AND ASCERTAIN THE NET PROFIT RA TE OF OTHER COMPARABLE CONTRACTORS. ON THE OTHER HAND, HE DISALLOWED EXPEN DITURE OF RS. 10.61 CRORES RESULTING IN ABNORMAL GROSS PROFIT RATE OF 59.60 PE R CENT, WHICH SHOULD NOT BE ACCEPTED. THE EFFECT THEREOF WAS THAT 70 PER CENT O F THE EXPENDITURE ON ACCOUNT OF PURCHASES WORTH RS. 10.61 CRORES OUT OF TOTAL PURCHASES OF RS. 14 CRORES WAS DISALLOWED. THE APPELLATE AUTHORITIES HAVE TAKE N A HOLISTIC AND BROADER VIEW AND HELD THAT AS THE BOOKS OF ACCOUNT HAD NOT BEEN PRODUCED AND WERE NOT REGULARLY MAINTAINED, THE BOOK RESULTS SHOULD BE RE JECTED. IT IS AGREED WITH THE REVENUE THAT THE ASSERTION OF THE ASSESSEE THAT THE BOOKS OF ACCOUNT WERE STOLEN HAD A HIDDEN MOTIVE AND THE ASSERTION IS RATHER UNB ELIEVABLE. THE ASSESSEE, THEREFORE, MUST SUFFER ADVERSE CONSEQUENCES. THE ON LY QUESTION IS WHETHER THE ADDITION MADE BY THE APPELLATE AUTHORITIES IN ADEQU ATE OR A HIGHER ADDITION WOULD BE JUSTIFIED. AS FAR A TOTAL TURNOVER IS CONC ERNED, SAME CANNOT BE DISPUTED AS THE ASSESSEE WAS ONLY DOING DEVELOPMENT WORK FOR THE GREATER NOIDA AUTHORITY. THE TOTAL TURNOVER IS ALSO SUPPORTED BY THE TAX AS SOURCE CERTIFICATE. THE QUANTUM OF TURNOVER WAS NOT ADVERSELY COMMENTED UPO N BY THE ASSESSING OFFICER. IN VIEW OF THE AFORESAID POSITION, REVENUE WAS DIRECTED TO ASCERTAIN THE GROSS PROFIT OR NET PROFIT RATES DECLARED AND ACCEP TED BY THE ASSESSING OFFICER IN CASE OF OTHER CONTRACTORS ENGAGED IN SIMILAR WORK. THE ASSESSING OFFICER HAS NOT GIVEN ANY COMMENTS IN THIS REGARDS. IN THESE CIRCUM STANCES, PRAYER OF THE REVENUE THAT AN ORDER OF REMAND MAY BE PASSED CANNO T BE ACCEPTED. THE ASSESSING OFFICER IN THE SUBSEQUENT YEARS HAS ACCEP TED 8 PER CENT NET PROFIT, WHICH IS THE FIGURE WHICH HAS BEEN ADOPTED BY THE A PPELLATE AUTHORITIES IN THE INSTANT CASE. THE REVENUE HAS NOT BEEN ABLE TO POIN T OUT OR STATE THAT THE OTHER SIMILAR CONTRACTORS HAVE A HIGHER PROFIT RATE, THAN THE NET PROFIT RATE OF 8 PER CENT AS HELD BY THE APPELLATE AUTHORITIES. THE SAID RATE WAS ALSO APPLIED IN THE ASSESSMENT YEAR 2010-11. IN VIEW OF THE AFORESAID FACTUAL POSITION, NO REASO N IS FOUND TO INTERFERE WITH THE IMPUGNED ORDER AND THE APPEAL IS DISMISSED. RELYING UPON THE SAME WE FIND THAT AS PER THE CHART DEPICTING THE G.P. AND N.P. OF THE ASSESSEE FOR PAST AND FUTURE YEARS THE ASSESSEE HAS BEEN 5 SHOWING A G.P. OF 10.24% ON AN AVERAGE WHILE IN THE IMPUGNED YEAR THE ASSESSEE HAS SHOWN A G.P. OF 10.27%. WE THEREFORE F IND NO REASON TO INTERFERE WITH THE RESULTS OF THE ASSESSEE. THE DISALLOWANCE MADE OF RS. 45,66,440/- IS THEREBY DELETED. 15. THIS GROUND OF APPEAL OF THE ASSESSEE IS THEREF ORE ALLOWED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :16/10/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, THE CIT(A), THE DR