Sh Lakhwinder Singh, Gurdaspur V. The Dy Commissioner Of Income Tax, Pathankot

ITA 536/ASR/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9541 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 19-10-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Depreciation; Condonation of delay; Revised return
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K. CHOUDHRY, JUDICIAL MEMBER ITA NO.527(ASR)/2015 ASSESSMENT YEAR:2011-12 PAN : ACLPS4296F ASSTT. COMMR. OF INCOME TAX, VS. SH. LAKHWINDER SIN GH, CIRCLE-VI, PATHANKOT. 1-TUNG HOUSE, VILL. TUNG, P.O. HAYAT NAGAR, GURDASPUR. (APPELLANT) (RESPONDENT) C.O. NO.31(ASR)/2015 (ARISING OUT OF ITA NO.527(ASR)/2015) ASSESSMENT YEAR:2011-12 PAN : ACLPS4296F SH. LAKHWINDER SINGH, VS. ASSTT. COMMR. OF INCOME TAX, CIRCLE-VI, PATHANKOT. 1-TUNG HOUSE, VILL. TUNG, P.O. HAYAT NAGAR, GURDASPUR. (APPELLANT) (RESPONDENT) ITA NO.536(ASR)/2015) ASSESSMENT YEAR:2011-12 PAN : ACLPS4296F SH. LAKHWINDER SINGH, VS. ASSTT. COMMR. OF INCOME TAX, CIRCLE-VI, PATHANKOT. 1-TUNG HOUSE, VILL. TUNG, P.O. HAYAT NAGAR, GURDASPUR. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SH.RAHUL DHAWAN, DR ASSESSEE BY: SH.P.N.ARORA, ADVOCATE DATE OF HEARING: 21/09/2016 DATE OF PRONOUNCEMENT: 19/10/2016 ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 2 ORDER PER T.S. KAPOOR, AM: THESE ARE THE CROSS APPEALS FILED BY THE REVENUE A S WELL AS BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-2, AMR ITSAR, DATED 15.07.2015. THE ASSESSEE HAS ALSO FILED C.O. AGAINS T THE APPEAL OF THE REVENUE, WHEREIN IT HAS MERELY SUPPORTED THE ORDER OF THE LD. CIT(A). 2. THE REVENUE IN THIS CASE IS AGGRIEVED AS THE LD. CIT(A) HAD ADMITTED THE APPEAL OF THE ASSESSEE, WHICH WAS FILE D LATE BY MORE THAN SIX MONTHS AND IS FURTHER AGGRIEVED BY THE FACT THA T THE LD. CIT(A) HAS REDUCED THE NET PROFIT RATE TO 8% OF GROSS RECEIPTS WHICH THE AO HAD APPLIED @ 10%. 3. THE ASSESSEE IS AGGRIEVED WITH THE SUSTENANCE O F THE APPLICATION OF NET PROFIT RATE OF 8% AND IS FURTHER AGGRIEVED BY THE SUSTENANCE OF ADDITION OF RS.1,18,342/- WHICH THE LD. CIT(A) HAS SUSTAINED ON ACCOUNT OF NON-DEDUCTION OF TDS U/S 40(A)(IA) OF THE ACT. 4. THE BRIEF FACTS, AS NOTED IN THE ASSESSMENT ORDE R ARE THAT THE ASSESSEE IS A CIVIL CONTRACTOR. DURING THE ASSESSME NT YEAR UNDER CONSIDERATION, THE GROSS RECEIPTS OF THE ASSESSEE A MOUNTED TO RS.12,58,30,195/- AGAINST WHICH THE ASSESSEE HAD DE CLARED NET PROFITS OF RS.69,34,742/-. DURING THE ASSESSMENT PROCEEDING S, THE AO OBSERVED ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 3 THAT THE MAJOR COMPONENTS OF EXPENSES OF THE ASSES SEE WERE ON ACCOUNT OF PURCHASES AND LABOUR EXPENSES, WHICH AMOUNTED T O RS.6,85,25,610/- AND RS.3,80,36,142/- RESPECTIVELY. THEREFORE, THE A SSESSEE WAS DIRECTED TO PRODUCE BILLS/VOUCHERS IN RESPECT OF PURCHASES A ND LABOUR EXPENSES WHICH THE ASSESSEE DID NOT PRODUCE BUT PRODUCED PHO TOCOPIES OF CERTAIN BILLS. THE AO REQUIRED THE ASSESSEE TO FURNISH ORIG INAL BILLS/VOUCHERS, BUT THE ASSESSEE DID NOT PRODUCE COMPLETE ORIGINAL BILL S/VOUCHERS. HOWEVER, THE ASSESSEE DID PRODUCE CASH BOOK AND LEDGER BUT D ID NOT PRODUCE COMPLETE VOUCHERS OF PURCHASES, LABOUR AND MUSTER R OLLS OF LABOUR. THE ASSESSEE WAS ALSO NOT ABLE TO PRODUCE THE BILLS OF BAJRI AND OTHER MATERIAL ETC. THEREFORE, THE AO REJECTED THE BOOKS OF ACCOUN T OF THE ASSESSEE AND APPLIED THE NET PROFIT RATE OF 10% OF THE GROSS TUR NOVER RELYING UPON THE DECISION OF ITAT, CHANDIGARH BENCH, IN THE CASE OF M/S. ESS ESS BUILDERS PVT. LTD., PASSED IN ITA NO.707/CHAND/1997 , DATED 16.09.2003. THE AO ALSO RELIED UPON THE CASE LAW O F ITAT, CHANDIGARH BENCH, IN THE CASE OF M/S. AGGARWAL CONSTRUCTION, L UDHIANA, PASSED IN ITA NOS.490 & 387/CHND/2009, DATED 25.01.2007, WHE RE NET PROFIT RATE OF 12% WAS APPLIED. THE AO FURTHER PLACED RELIANCE ON THE CASE LAW OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S. SHIVAM CONSTRUCTION COMPANY. THE AO ALSO DID NOT ALLOW THE CLAIM OF DEPRECIATION. THE AO FURTHER OBSERVED THAT THE ASSE SSEE HAD PAID INTEREST ON LOAN FOR PURCHASE OF JCB MACHINE AND TI PPERS AND THE ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 4 ASSESSEE HAD NOT DEDUCTED TDS, THEREFORE, FURTHER D ISALLOWANCE U/S 40(A)(IA) OF THE ACT TO THE TUNE OF RS.1,18,342/- W AS MADE. 5. AGGRIEVED WITH THE ORDER, THE ASSESSEE FILED AP PEAL BEFORE THE LD. CIT(A) AND MADE VARIOUS SUBMISSIONS AND ALSO RELIED UPON A NUMBER OF CASE LAWS FOR THE PROPOSITION THAT NET PROFIT RATE OF 5% WAS SUFFICIENT WHERE THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE REJE CTED. THE ASSESSEE ALSO AGITATED BEFORE THE LD. CIT(A) REGARDING REJEC TION OF BOOKS OF ACCOUNT. BEFORE THE LD. CIT(A), THE COMPARATIVE FIGURES OF P REVIOUS TWO YEARS OF GROSS RECEIPTS AND NET PROFIT RATIO WERE ALSO SUBMI TTED. THE LD. CIT(A) AFTER GOING THROUGH THE MATERIAL ON RECORD AND SUBM ISSIONS OF THE ASSESSEE REDUCED THE NET PROFIT RATE OF 10% TO 8% A ND ALSO DIRECTED THE AO TO ALLOW DEPRECIATION OUT OF NET PROFITS OF 8%. HOWEVER, THE DISALLOWANCE OF RS.1,18,342/- UNDER SECTION 40(A)(I A) OF THE ACT WAS CONFIRMED. 6. AGGRIEVED BOTH THE PARTIES ARE IN APPEAL BEFORE US. 7. AT THE OUTSET, THE LD. AR TOOK UP HIS APPEAL AND SUBMITTED THAT THE LD. CIT(A) HAS WRONGLY APPLIED NET PROFIT RATE OF 8%, WHICH IS QUIET EXCESSIVE AND ARBITRARY AND IS AGAINST THE FACTS OF THE CASE AND ALSO THE PAST HISTORY OF THE ASSESSEE. THE LD. AR IN THIS RE SPECT INVITED OUR ATTENTION TO PAGE 7 OF THE LD. CIT(A)S ORDER, WHER E THE LD. CIT(A) HAS NOTED GROSS RECEIPTS OF THREE YEARS, INCLUDING THE PRESENT YEAR AND TWO PREVIOUS YEARS. THE LD. AR SUBMITTED THAT THE NET PROFIT RATIO OF 5.51% IN THE PRESENT YEAR IS MORE THAN THE NET PROFIT RAT IO OF EARLIER TWO YEARS ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 5 DESPITE THE FACT THAT THE TURNOVER OF THE ASSESSEE HAD INCREASED. IT WAS SUBMITTED THAT THE ASSESSEE WAS IN THE SAME LINE OF BUSINESS FOR SO MANY YEARS AND INCOMES OFFERED BY THE ASSESSEE IN E ARLIER YEARS WERE ACCEPTED AND THEREFORE, THE LD. CIT(A) SHOULD HAVE CONSIDERED THE PAST RESULTS OF THE ASSESSEE. IT WAS SUBMITTED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY VARIO US ORDERS OF THE ITAT, AMRITSAR BENCH, WHEREIN THE RATE OF 5% HAS BEEN ACC EPTED TO BE FAIR NET PROFIT RATE IN THE CASE OF CIVIL CONTRACTOR. THE L D. AR RELIED ON THE FOLLOWING CASE LAWS: I) ITAT, AMRITSAR BENCH, IN THE CASE OF SH. MOHAN S INGH CONTRACTOR VS. ITO, IN ITA NO.59/ASR/2012, DATED 05.06.2012 RELATING TO A.Y. 2008-09. II) ITAT, AMRITSAR BENCH, IN THE CASE OF ITO VS. M/S. S URINDER PAL NAYYAR, IN ITA NO.366/ASR/201, DATED 30.04.201 2 RELATING TO A.Y. 2006-07. III) ITAT, AMRITSAR BENCH, IN THE CASE OF SH. ABDUL SALA M MIR VS. DCIT, IN ITA NO.115/ASR/2013, DATED 06.08.2014 RELA TING TO A.Y. 2009-10. IV) ITAT, AMRITSAR BENCH, IN THE CASE OF M/S. MATTEWAL CO- OPERATIVE L/C SOCIETY LTD. VS. ACIT, CIRCLE V, AMRI TSAR, DATED 27.12.2012 IN ITA NO.450/ASR/2012, RELATING TO A.Y. 2008- 09. V) ITAT, AMRITSAR BENCH, IN THE CASE OF ACIT, CIR.VI, PATHANKOT VS. M/S. J.S. GROVER CONSTRUCTION , IN ITA NO.63/AS R/2016, DATED 26.08.2016 RELATING TO A.Y. 2011-12. VI) ITAT, AMRITSAR BENCH, IN THE CASE OF M/S. SATISH AG GARWAL & CO., ORDER DATED 21.01.2016 IN ITA NO.483/ASR/2013, RELATING TO A.Y. 2009-10. ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 6 8. THE LD. AR SUBMITTED THAT IN THE CASE OF SH. MO HAN SINGH CONTRACTOR (SUPRA), THE ASSESSEE HAD DECLARED A NE T PROFIT RATE OF 3.60% AS COMPARED TO 3.87% IN THE IMMEDIATELY PRECEDING Y EAR. THE AO AFTER REJECTING THE BOOKS OF ACCOUNT APPLIED NET PROFIT RATE OF 8%. THE TRIBUNAL VIDE ITS ORDER DATED 05.06.2012 HAD HELD THAT THE A SSESSEE HAD DECLARED NET PROFIT RATE OF 3.87% IN THE IMMEDIATELY PRECEDI NG YEAR AND WHICH HAD BEEN ACCEPTED BY THE DEPARTMENT. THEREFORE, KE EPING IN VIEW THE PAST HISTORY OF THE ASSESSEE, NET PROFIT RATE OF 5% WAS JUSTIFIED. SIMILARLY, INVITING OUR ATTENTION TO THE ORDER OF THE AMRITSAR BENCH OF THE TRIBUNAL IN THE CASE OF M/S. SURINDER PALL NAYYAR CONTRACTOR S (SUPRA), IT WAS SUBMITTED AT IN THIS CASE, THE AO HAD APPLIED 8% N ET PROFIT RATE AGAINST THE ASSESSEES DECLARED PROFIT IN THE EARLIER YEARS AT 3.6%. THE ITAT, DISMISSED THE APPEAL OF THE REVENUE WHEREIN THE LD. CITA) HAD REDUCED THE NET PROFIT RATE FROM 8% TO 5%. THE LD. AR FURTH ER TOOK US TO THE ORDER OF THE TRIBUNAL, DATED 26.08.2016, IN THE CASE OF . J.S. GROVER CONSTRUCTIONS (SUPRA), WHEREIN THE LD. CIT(A) HAD R ESTRICTED THE NET PROFIT RATE AT 7% INSTEAD OF 10% DETERMINED BY THE AO AND THE TRIBUNAL HAD CONFIRMED THE ORDER OF THE LD. CIT(A). THE LD. AR A LSO TOOK US TO THE ORDER OF THE TRIBUNAL, DATED 21.01.2016, IN THE CASE OF M /S. SATISH AGGARWAL & CO. (SUPRA) ARE SUBMITTED THAT IN THIS CASE ALSO, T HE TRIBUNAL HAS HELD THE NET PROFIT RATE OF 5% TO BE REASONABLE PROFIT. IT WAS SUBMITTED THAT THE TRIBUNAL HAD DISMISSED THE APPEAL OF THE REVENUE, W HICH WAS REMANDED BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN VIEW OF THE RATIO IN ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 7 TELELINKS VS. CIT, BATHINDA. IT WAS SUBMITTED THAT THE TRIBUNAL HAS DECIDED THE ISSUE IN VIEW OF THE PAST HISTORY OF TH E ASSESSEE AND ALSO ON THE FACT THAT EARLIER RETURNS WERE ACCEPTED BY THE DEPARTMENT AND THE ASSESSEE WAS ENGAGED IN THE SAME LINE OF BUSINESS AND THEREFORE, HAD HELD 5% RATE TO BE REASONABLE RATE. IN VIEW OF THES E FACTS AND CIRCUMSTANCES AND JUDICIAL PRECEDENTS AS WELL AS ON THE BASIS OF PAST HISTORY OF THE ASSESSEE, IT WAS ARGUED THAT THE NET PROFIT RATE OF 5% SHOULD BE APPLIED IN THE PRESENT CASE. 9. AS REGARDS THE DISALLOWANCE OF RS.1,18,342/- UND ER SECTION 40A(IA) OF THE ACT, THE LD. AR SUBMITTED THAT ONCE THE PROF ITS OF THE ASSESSEE WERE ASSESSED ON THE BASIS OF ESTIMATION, NO FURTHER DIS ALLOWANCE WAS WARRANTED. TO SUPPORT HIS CONTENTION, THE LD. AR PL ACED RELIANCE ON THE ORDER OF THE ITAT, AMRITSAR BENCH IN THE CASE OF J. S. GROVER CONSTRUCTION, WHERE SIMILAR DISALLOWANCE HAS BEEN D ELETED BY FOLLOWING VARIOUS JUDGMENTS OF VARIOUS HIGH COURTS. 10. FURTHER, IT WAS ARGUED THAT SINCE PAYEE HAD INC LUDED INTEREST INCOME IN ITS PROFIT & LOSS ACCOUNT, THEREFORE, ALS O ADDITION WAS NOT WARRANTED. 11. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT T HE LD. CIT(A) HAD WRONGLY ALLOWED RELIEF TO THE ASSESSEE BY REDUCING NET PROFIT RATE FROM 10% TO 8%, AS THE ASSESSEE WAS NOT ABLE TO PRODUCE BILLS OF PURCHASES AND LABOUR. THE ONUS WAS ON THE ASSESSEE TO PROVE T HAT THE BOOKS OF ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 8 ACCOUNT WERE CORRECT. AS REGARDS DISALLOWANCE U/S 40A(IA) OF THE ACT, THE LD. DR SUBMITTED THAT THE DISALLOWANCE IS A MAN DATORY DISALLOWANCE FOR NON DEDUCTION OF TDS, THEREFORE, THE LD. CIT(A ) HAS RIGHTLY CONFIRMED THE SAME. 12. THE LD. DR FURTHER SUBMITTED THAT HIS ARGUMENTS RELATING TO REDUCTION OF RATE FROM 10% TO 8% ALSO APPLIES TO TH E REVENUES APPEAL. IT WAS SUBMITTED THAT THE AO HAD GIVEN COGENT REASONS FOR REJECTING BOOKS OF ACCOUNT AND THEREFORE, THE LD. CIT(A) SHOULD NO T HAVE TAKEN A DIFFERENT VIEW. THE LD. DR FURTHER SUBMITTED THAT T HE APPEAL OF THE ASSESSEE WAS LATE BY MORE SIX MONTHS AND THE LD. CI T(A) SHOULD NOT HAVE ADMITTED THE SAME. 13. THE LD. COUNSEL, HOWEVER, SUBMITTED THAT THE LD . CIT(A) HAD GIVEN COMPLETE REASONS FOR ADMISSION OF APPEAL AFTER SIX MONTHS AS THE FATHER OF THE ASSESSEE WAS ILL AND IN THIS RESPECT OUR ATT ENTION WAS INVITED TO LD. CIT(A)S ORDER AT PAGE 3, WHEREIN IT HAS BEEN STATE D THAT THE FATHER OF THE ASSESSEE WAS TAKEN TO VARIOUS HOSPITALS ON VARIOUS DATES FOR TREATMENT. 14. WE HAVE HEARD THE RIVAL CONTENTIONS IN THE LIGH T OF THE MATERIAL PLACED ON RECORD. WE FIND THAT IT IS A FACT THAT TH E ASSESSEE DID NOT PRODUCE COMPLETE VOUCHERS OF PURCHASES AND LABOUR C HARGES DURING ASSESSMENT PROCEEDINGS AND THEREFORE, THE ACTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNT IS JUSTIFIED AND THE LD. CIT(A ) HAS ALSO UPHELD THE REJECTION OF BOOKS OF ACCOUNT. NOW, AFTER REJECTION OF BOOKS OF ACCOUNT, ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 9 THE AO IS BOUND TO ESTIMATE THE INCOME OF THE ASSE SSEE IN A BEST MANNER FROM THE AVAILABLE MATERIAL AND KEEPING IN VIEW THE PAST HISTORY OF THE ASSESSEE. AND FROM HISTORY OF OTHER PERSONS ENGAGE D IN SIMILAR TRADE. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAD DECLAR ED NET PROFIT RATE OF 5.34% IN THE ASSESSMENT YEAR 2009-10, 5.21% IN THE ASSESSMENT YEAR 2010-11 AND 5.51% IN THE ASSESSMENT YEAR UNDER CON SIDERATION. THE NET PROFIT RATE DECLARED BY THE ASSESSEE IS PROGRES SIVE DESPITE OF THE FACT THAT THE TURNOVER OF THE ASSESSEE HAS ALSO INCREASE D. THE HONBLE PUNJAB & HARYANA HIGH COURT, IN THE CASE OF TELELINKS VS. CIT, BATHINDA, HAD LAID DOWN THE FOLLOWING CRITERIA FOR DETERMINATION OF NET INCOME IN THE CASES, WHERE BOOKS OF ACCOUNT OF THE ASSESSEE ARE REJECTED: 1) PAST TAX HISTORY OF THE ASSESSEE 2) ASSESSMENT ORDERS PASSED BY AND ACCEPTED BY THE DEPARTMENT. 3) THE NATURE OF ASSESSEES BUSINESS 4) AN APPRAISAL OF THE VALUE OF THE CONTRACT 5) PREVAILING ECONOMIC CONDITIONS VIS--VIS THE ASS ESSEES BUSINESS 6) THE PRICE OF RAW-MATERIAL AND LABOUR ETC. 7) THE RISE IN PRICE INDEX AS NOTIFIED BY THE CENTR AL GOVERNMENT FROM TIME TO TIME 8. THE ASSESSMENTS OF OTHER ASSESSEES ENGAGED IN SI MILAR BUSINESS WE FIND THAT THE PAST HISTORY OF THE ASSESSEE INDIC ATES THAT THE ASSESSEE HAD BEEN EARNING NET PROFIT RATE IN THE RANGE OF 5. 21% TO 5.34%, WHEREAS ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 10 IN THE PRESENT YEAR, THE ASSESSEE DECLARED NET PRO FIT RATE AT 5.51%. THEREFORE, THE PRESENT RATE OF NET PROFIT DECLARED BY THE ASSESSEE IS IN LINE WITH THE EARLIER YEARS. WE FURTHER FIND THAT T HE EARLIER YEARS RETURNS HAS BEEN ACCEPTED BY THE DEPARTMENT AND THEREFORE, THERE IS NO REASON WHY THE SIMILAR RATHER INCREASED RATE OF NET PROFIT SHOULD NOT HAVE BEEN ACCEPTED BY THE AUTHORITIES BELOW, ESPECIALLY KEEPI NG IN VIEW THE FACT THAT THE ASSESSEE IS ENGAGED IN SAME KIND OF ACTIVI TIES AS WAS IN THE EARLIER YEAR. THE LD. COUNSEL HAS RELIED UPON A NUM BER OF CASE LAWS NOTED ABOVE IN THIS ORDER, WHEREIN THE TRIBUNAL HAD HELD THE NET PROFIT RATE OF 5% TO BE REASONABLE KEEPING IN VIEW THE PAST HISTO RY OF THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, THE FINDING OF THE TRIBUNA L IN ITA NO.58/ASR/2012 IN THE CASE OF MOHAN SINGH CONTRACTO R ARE REPRODUCED BELOW: 5.1. AS REGARDS THE ESTIMATION OF INCOME, THE AO H AS APPLIED NET PROFIT RATE OF 8% AND HAS RELIED UPON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT, IN THE CASE OF CIT, HI SSAR VS. PRABHAT KUMAR CONTRACTOR, SIRSA, IN ITA NO.293 OF 2008 DATE D 14.11.2008. THE AO HAS NOT BROUGHT OUT THE FACTS ON RECORD OF THE CASE OF CIT, HISSAR VS. PRABHAT KUMAR CONTRACTOR, SIRSA (SUPRA), AS TO HOW THE FACTS IN THAT CASE ARE IDENTICAL TO THE FACTS OF TH E PRESENT CASE. THE ASSESSEE HAS BEEN DECLARING NET PROFIT RATE OF 3.87 % IN THE PRECEDING YEAR AT A TURNOVER OF RS.1,32,26,714/-, WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT THERE IS NO DISPUTE TO T HIS FACT. KEEPING IN VIEW THE PAST HISTORY OF THE PRESENT CASE OF THE ASSESSEE AND FACTS AND CIRCUMSTANCES OF THE PRESENT CASE A NET P ROFIT RATE OF 5% IF APPLIED TO THE CONTRACT RECEIPTS DECLARED BY THE AS SESSEE WILL MEET BOTH ENDS OF JUSTICE. THE AO IS DIRECTED TO ACT ACC ORDINGLY. THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE MODIFIED A CCORDINGLY. THUS, THE GROUNDS OF THE ASSESSEE ARE PARTLY ALLOWED. ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 11 15. SIMILARLY, THE TRIBUNAL IN ITA NO.366/ASR/2010, VIDE ORDER DATED 30/04/2012, IN THE CASE OF SURINDER PAL NAYYAR CONT RACTORS, HAS HELD THE RATE OF 5% TO BE REASONABLE BY HOLDING AS UNDE R: 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATER IALS AVAILABLE WITH US. WE HAVE ALSO THOROUGHLY GONE TH ROUGH THE ORDERS PASSED BY THE REVENUE AUTHORITIES ON THE ISSUE RAI SED BY THE DEPARTMENT AS WELL AS BY THE ASSESSEE. IT IS A MATT ER OF RECORD THAT THE ASSESSEE HAS FILED THE ORIGINAL RETURN ON 30.10 .2008 BY DECLARING LOSS OF RS.4,40,514/- BUT SUBSEQUENTLY TH E ASSESSEE HAS ALSO FILED REVISED RETURN ON 08.12.2008 BY DECLARIN G LOSS OF RS.4,17,515/- AS MENTIONED BY THE AO AT PAGE 1. IT IS ALSO A MATTER OF RECORD THAT AFTER CONSIDERING THE DOCUMENTARY E VIDENCE FILED BY THE ASSESSEE AS WELL AS REPLY TO THE NOTICE DATED 2 8.11.2008, THE AO APPLIED PROVISIONS OF SECTION 145(3) OF THE ACT IN THE CASE OF THE ASSESSEE BECAUSE THE ASSESSEE HAS NOT FILED SOME DO CUMENTARY EVIDENCE IN ORIGINAL BEFORE THE AO. THEREFORE, WE A RE OF THE OPINION THAT THE AO AS WELL AS THE LD. FIRST APPELLATE AUTH ORITY HAS RIGHTLY APPLIED THE PROVISIONS OF SECTION 145(3) IN THE CAS E OF THE ASSESSEE. SECONDLY, AS REGARDS THE BENEFIT OF CARRIED FORWAR D LOSSES, KEEPING IN VIEW THE REVISED RETURN FILED BY THE ASSESSEE AF TER DUE DATE, WE ARE OF THE VIEW THAT THE ASSESSEE IS NOT ENTITLED FOR ANY CARRIED FORWARD LOSSES AS DISCUSSED BY THE AO AND UPHELD BY THE LD. FIRST APPELLATE AUTHORITY. AS REGARDS TO THE APPLICATION OF NET PROFIT RATE AT 5% AFTER ALLOWING DEPRECIATION AND INTEREST TO THE PARTNERS OF ASSESSEES TURNOVER AS AGAINST 8% APPLIED BY THE AO , IT IS A MATTER OF FACT THAT THE AO HAS NOT GIVEN ANY REASONABLE EX PLANATION WHILE APPLYING 8% NET PROFIT RATE ON THE ASSESSEES GRO SS RECEIPTS FOR THE ASSESSMENT YEAR UNDER REFERENCE. THE INCOME ASSESSE D IN THE ASSESSMENT YEAR 2001-02 IN ASSESSEES CASE WAS APPA RENTLY 3.6% OF ITS NET RECEIPTS. BUT IN THE PRESENT ASSESSMENT YEAR, THE AO HAS POINTED OUT VARIOUS DEFECTS IN THE ASSESSMENT ORDER . THE LD. CIT(A) CONSIDERING ALL THE DEFECTS POINTED OUT BY THE AO AND FINALLY, VALIDLY AND REASONABLY DETERMINED THE NET PROFIT RATE AT 5% AFTER ALLOWING DEPRECIATION AND INTEREST TO THE PARTNERS ON THE AS SESSEES TURNOVER. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE CONSIDERED OPINION THAT THE LD. FIRST AP PELLATE AUTHORITY HAS RIGHTLY APPLIED NET PROFIT RATE OF 5% AFTER ALL OWING DEPRECIATION AND INTEREST TO THE PARTNERS ON ASSESSEES TURN OVE R AS AGAINST 8% APPLIED BY THE A.O. WE UPHOLD THE IMPUGNED ORDER BY DISMISSING THE APPEAL FILED BY THE DEPARTMENT AS WELL AS C.O. FILED BY THE ASSESSEE. ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 12 16. THE TRIBUNAL VIDE ITS ORDER DATED 21.01.2016, I N ITA NO.483/ASR/2013, IN THE CASE OF SATISH AGGARWAL & C O., AFTER TAKING INTO ACCOUNT THE FACTORS NOTED BY THE HONBLE PUNJAB & H ARYANA HIGH COURT IN TELELINKS VS. CIT, BATHINDA, HAS ALSO HELD THE R ATE OF 5% TO BE REASONABLE, BY HOLDING AS UNDER: 12. AS DEMONSTRATED BY LEARNED AR THE PAST AND SUB SEQUENT PROFIT MARGINS REMAINED LESS THAN 5% AND THE ACTIVI TIES OF THE ASSESSEE REMAINED SAME, THEREFORE, WE UPHOLD THE AP PLICATION OF 5% NET PROFIT RATE. 17. HOWEVER, IT IS ALSO A FACT THAT IN CASE OF NON SUBMISSION OF COMPLETE VOUCHERS AND PURCHASE INVOICES TO THE ASSE SSING AUTHORITY, THERE IS ALWAYS A CHANCE OF UNDERSTATING THE PROFIT S. THE ACCEPTANCE OF PROFITS DECLARED BY THE ASSESSEE AT THE SAME FIGURE WITHOUT VERIFICATION OF PURCHASE INVOICES AND VOUCHERS CANNOT BE EQUATED W ITH A CASE WHERE COMPLETE VOUCHERS AND BOOKS HAD BEEN SUBMITTED. THO UGH, THE ASSESSEE IN EARLIER YEARS HAD DECLARED NET PROFIT RATE RANGI NG FROM 5.21% TO 5.34% AND THE DEPARTMENT HAD ACCEPTED THE SAME, THEREFORE , IT MAY BE A CASE THAT IN THOSE YEARS, THE ASSESSEE HAD FILED COMPLET E VOUCHERS AND PURCHASE INVOICES. THEREFORE TO EQUATE A PERSON WH O MAINTAINS COMPLETE VOUCHES AND BOOKS OF ACCOUNT WITH A PERSON WHO DOES NOT MAINTAIN COMPLETE BOOKS OF ACCOUNT IS NOT JUSTIFIED. THERE S HOULD BE SOME DETERRENT SO AS TO INDUCE A PERSON TO MAINTAIN PRO PER BOOKS OF ACCOUNTS. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT TH OUGH KEEPING IN VIEW THE PAST HISTORY OF THE ASSESSEE, THE RATE OF NET P ROFIT RATE DECLARED AT ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 13 5.51% SHOULD HAVE BEEN ACCEPTED BUT TO CREATE A D ETERRENT TO MAINTAIN BOOKS OF ACCOUNTS, THE LD. CIT(A) HAS RIGHTLY APPL IED A HIGHER NET PROFIT RATIO. THE LD. CIT(A) HAS APPLIED 8% RATE OF NET P ROFIT, WHICH IS QUITE HIGH WHEN COMPARED TO THE ACTUAL RATE OF NET PROFIT EARN ED BY THE ASSESSEE IN THE EARLIER YEARS. THE BOOKS OF ACCOUNTS OF THE ASS ESSEE HAS BEEN AUDITED U/S 44AB OF THE ACT AND IT CANNOT BE ASSUMED THAT THE BOOKS OF ACCOUNTS WERE NOT SUPPORTED BY VOUCHERS. THE ASSESS EE IN THIS CASE HAS PRODUCED PHOTOCOPIES OF PURCHASE BILLS AND THEREFOR E, THE LD. CIT(A) HAS RIGHTLY DISTINGUISHED THE CASE LAWS RELIED ON BY T HE ASSESSING OFFICER. THEREFORE, KEEPING IN VIEW ALL FACTS & CIRCUMSTANCE S AND KEEPING IN VIEW A BALANCED VIEW, WE DEEM IT APPROPRIATE THAT A 1% H IGHER RATE OF NET PROFIT WOULD HAVE SERVED THE ENDS OF JUSTICE. IN V IEW OF THE ABOVE, WE DIRECT THE AO TO CALCULATE THE PROFITS OF THE ASSES SEE BY APPLYING NET PROFIT RATE OF 6.51% ON THE GROSS RECEIPTS. 18. AS REGARDS THE GRIEVANCE OF THE REVENUE THAT TH E DEPRECIATION SHOULD NOT HAVE BEEN ALLOWED, WE FIND THAT THE DEP ARTMENT VIDE CIRCULAR NO. 29D, DATED 31.08.1965 (PLACED AT APB 34) HAS DI RECTED THAT WHERE THE BOOKS OF THE ACCOUNT ARE REJECTED AND PROFITS A RE ESTIMATED, DEPRECIATION ALLOWANCE SHOULD BE GIVEN. FOR THE SAK E OF CONVENIENCE, PARA-2 OF SAID CIRCULAR IS REPRODUCED AS UNDER: 2. THE BOARD CONSIDER THAT WHERE IT IS PROPOSED TO ESTIMATE THE PROFIT AND THE PRESCRIBED PARTICULARS HAVE BEEN FUR NISHED BY THE ASSESSEE, THE DEPRECIATION ALLOWANCE SHOULD BE SEPA RATELY WORKED OUT. IN ALL SUCH CASES THE GROSS PROFIT SHOULD BE E STIMATED AND THE DEDUCTIONS AND ALLOWANCES INCLUDING THE DEPRECIATIO N ALLOWANCE ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 14 SHOULD BE SEPARATELY DEDUCTED FROM THE GROSS PROFIT . IF IT IS CONSIDERED THAT THE NET PROFIT SHOULD BE ESTIMATED IT SHOULD BE ESTIMATED SUBJECT TO THE ALLOWANCE FOR DEPRECIATION AND THE DEPRECIATION ALLOWANCE SHOULD BE DEDUCTED THEREFROM . 19. WE FURTHER FIND THAT THE HONBLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF LALI CONSTRUCTION CO. (SUPRA) HAS HELD THAT WHERE THE ASSESSEE GIVES INFORMATION REQUIRED UNDER SECTION 3 2 OF THE ACT REGARDING CLAIM OF DEPRECIATION, THE AO IS BOUND TO ALLOW THE CLAIM OF DEPRECIATION. THE FINDINGS OF THE HONBLE COURT ARE REPRODUCED BE LOW: TAKING UP THE FIRST POINT, THE MATTER IS NO LONGER RES INTEGRA. THE DIVISION BENCHES OF THIS COURT IN COMMISSIONER OF I NCOME TAX V. CHOPRA BROS. INDIA (P) LIMITED (2001) 252 ITR 412 A ND GIRDHARI LAL V. COMMISSIONER OF INCOME TAX(2002) 256 ITR 318 WHI LE CONSIDERING THE AFORESAID ISSUE, IN VIEW OF THE CIRCULAR ISSUED BY THE BOARD, HAD HELD IN A CASE WHERE THE ASSESSEE MAKES A SPECIFIC CLAIM FOR DEPRECIATION AND GIVES THE INFORMATION AS REQUIRED U/S 32 OF THE ACT, THE ASSESSING OFFICER IS BOUND TO TAKE THE CLA IM OF THE ASSESSEE INTO CONSIDERATION. FOLLOWING THE AFORESAID JUDGMEN TS, IT IS HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION ON ACCOUNT OF DEPRECIATION FROM RECEIPTS WHILE APPLYING NET PROFIT RATE ON THE GROS S RECEIPTS. IN VIEW OF THE ABOVE, THE LD. CIT(A) HAS RIGHTLY A LLOWED THE CLAIM OF DEPRECIATION OUT OF NET PROFIT WORKED OUT BY APPLYI NG NET PROFIT RATE. 20. AS REGARDS THE GRIEVANCE OF THE REVENUE REGARDI NG LATE FILING OF APPEAL BY THE ASSESSEE BEFORE THE LD. CIT(A) AND AD MISSION BY HIM, WE FIND THAT THE LD. CIT(A) HAS GIVEN COGENT REASONS F OR ACCEPTING THE APPEAL OF THE ASSESSEE, WHICH HE HAS NARRATED AT PAGE 3 OF THE IMPUGNED ORDER, ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 15 WHICH REASONS WE FIND ARE REASONABLE FOR ADMISSION OF THE APPEAL AND THEREFORE, THIS GRIEVANCE OF THE REVENUE IS REJECT ED. 21. AS REGARDS THE GRIEVANCE OF THE REVENUE THAT T HE AO HAS TAKEN COGENT REASON FOR REJECTING THE BOOKS OF ACCOUNT, T HE LD. CIT(A) SHOULD NOT HAVE TAKEN DIFFERENT VIEW. THE LD. CIT(A) HAS N OT TAKEN A DIFFERENT VIEW RATHER HE HAS UPHELD THE ACTION OF THE A.O. I N REJECTING BOOKS OF ACCOUNT AND BEFORE US NOTHING HAS BEEN ARGUED REGAR DING REJECTION OF BOOKS THEREFORE WE UPHOLD THE ACTION OF THE LD. CIT (A) IN REJECTING BOOKS OF ACCOUNTS. 22. IN VIEW OF THE ABOVE, THE APPEAL OF THE REVENUE IS DISMISSED. 23. AS REGARDS THE APPEAL OF THE ASSESSEE, WE HAVE ALREADY ALLOWED PART RELIEF TO THE ASSESSEE BY HOLDING THAT NET PROFIT R ATE OF 6.51% SHOULD BE APPLIED INSTEAD OF 8% SUSTAINED BY THE LD. CIT(A). 24. AS REGARDS THE DISALLOWANCE UNDER SECTION 40(A) (IA) OF THE ACT, WE FIND THAT SINCE THE INCOME OF THE ASSESSEE HAS BEEN WORKED OUT ON ESTIMATION, THEREFORE, NO FURTHER DISALLOWANCE WAS WARRANTED, AS HELD BY THE ITAT, AMRITSAR BENCH IN THE CASE OF J.S. GROVER CONSTRUCTIONS, IN ITA NO.63/ASR/2016, VIDE ORDER DATED 26.08.2016, AS UND ER: 9.1 IN THIRD GROUND OF APPEAL THE DEPARTMENT HAS R ELIED UPON THE DECISION OF SUPREME COURT OF INDIA IN THE CASE OF K ACHAWALA JUNKS VS JCIT REPORTED IN 288 ITR 10. A COPY OF THE JUDGM ENT IS PLACED AT PAGE NO. 98 TO 100 OF THE PAPER-BOOK WHICH SUPPORTS THE CASE OF THE ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 16 ASSESSEE RATHER THE CASE OF THE DEPARTMENT. THUS TH IS GROUND OF APPEAL MAY ALSO BE DISMISSED. AS FAR AS THE FOURTH GROUND OF APPEAL IS CONCERNED, IT IS ALSO LIABLE TO BE REJECTED ONCE THE RATE OF PROFIT IS APPLIED NO FURTHER DISALLOWANCE OR ADDITION CAN BE MADE. THIS VIEW FINDS SUPPORT FROM THE FOLLOWING JUDGMENTS:- I) DECISION OF JHARKHAND HIGH COURT IN THE CASE OF AMITABH CONSTRUCTION (P) LTD VS. ADDL. CIT REPORTED IN 335 ITR 523. (REFER PAGE NO 101 TO 104 OF PAPER BOOK). II) DECISION OF KERALA HIGH COURT IN THE CASE OF S AMURAI TECHNO TRADING CO LTD VS. CIT REPORTED IN 197 TAXMAN 144. (REFER PAGE NO 105 TO 109 OF PAPER BOOK) III) DECISION OF ANDHRA PRADESH HIGH COURT IN THE C ASE OF MADDI SUDARSANAM OILS MILLS VS CIT REPORTED IN 37 ITR 369 WHICH WAS FOLLOWED IN THE CASE OF INDWELL CONSTRUCTIONS V S CIT REPORTED IN 232 ITR 776. (REFER PAGE NO 110 TO 112 OF PAPER BOOK) IV) DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. BANWARILAL BANSIDHAR REPORTED IN 229 ITR 229 IN WHI CH IT WAS HELD NO DISALLOWANCE CAN BE MADE U/S 40(A)(III) WHERE GP RATE IS APPLIED. (REFER PAGE NO 113 TO 115 OF PA PER BOOK) V) DECISION OF ITAT, AMRITSAR BENCH, IN THE CASE OF SM T. BALBIR KAUR VS. ITO IN ITA NO. 151(ASR)/2016, ORDER DATED 23/05/2016 RELATING TO AY 2004-05. 25. THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE TRIBUNAL IN THE CASE OF J.S. GROVER CONSTRUCTIONS, DATED 26.08.2016 (SUPRA), WE ALLOW THIS GROUND OF APPEAL OF THE ASS ESSEE. 26. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSE E IS PARTLY ALLOWED. 27. AS REGARDS THE C.OS. FILED BY THE ASSESSEE, THE SAME IS ONLY SUPPORTIVE OF THE LD. CIT(A)S ORDER, WHICH WE HAVE ALREADY DISPOSED OFF ITA NO.527 & 536(ASR)/2015 C.O. NO.31(ASR)/2015. 17 HEREINABOVE BY CONFIRMING THE ACTION OF THE LD. CIT (A). THEREFORE, THE SAME ARE DISMISSED. 28. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND THAT OF THE ASSESSEE IS PARTLY ALLOWED, WHEREAS C.O. FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/10/20 16. SD/- SD/- (N.K. CHOUDHRY) (T.S. KAPOOR ) JUDICIAL MEMBER ACCOUNTANT MEMBER /SKR/ DATED: 19/10/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH. LAKHWINDER SINGH, GURDASPUR. 2. THE ACIT,CIRCLE-II, PATHANKOT, ASR 3. THE CIT(A), ASR 4. THE CIT, ASR. 5. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER