ACIT, Jaipur V. SHRI OMPRAKASH KEDIA, Jaipur

ITA 552/JPR/2012

• Counselvise Citation: 55223114 RSA 2012
• Duration Of Justice: 2 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 05-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS NEENA JEEPH
• Keywords: Depreciation; Additional evidence
• Section: 44AD

Judgement Text

ITA NO. 552/JP/2012 THE ACIT VS. OM PRAKASH K EDIA, JAIPUR 1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO. 552/JP/2012 ASSESSMENT YEAR: 2007-08 PAN : ADRPK 6433 F THE ACIT VS. SHRI OM PRAKASH KEDIA CIRCLE- 4 236, AWHO COLONY JAIPUR AMBABARI, JAIPUR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.C. PARWAL DEPARTMENT BY: MRS. NEENA JEEPH DATE OF HEARING: 30-10-2014 DATE OF PRONOUNCEMENT: 12-12-2014 ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) JAIPUR DATED 16-03-2012 WHEREIN THE REVENU E HAS RAISED FOLLOWING GROUND IN ITS APPEAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN:- (I) DELETING TRADING ADDITION OF RS. 9,34,532/ MADE BY AO WITHOUT APPRECIATING VARIOUS DEFECTS NOTICED BY THE AO IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. ITA NO. 552/JP/2012 THE ACIT VS. OM PRAKASH K EDIA, JAIPUR 2 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A CIVIL CONTRACTOR WHO IS WORKING FOR PWD AND ARCHEOLOGICAL DEPARTMENT. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, LD. AO NOTICED THAT THE ASS ESSEE WAS NOT MAINTAINING SITE WISE EXPENSES COST AND STOCK REGIS TER OF MATERIAL CONSUMED IN THE WORK. THE ASSESSEE ACCEPTED THESE DISCREPANC IES. IT WAS FURTHER FOUND THAT PURCHASE OF RAW MATERIALS AND BUILDING MATERIA LS WERE MADE ON THE BASIS OF SELF MADE VOUCHERS AND NO LOG BOOK WAS MAINTAINE D FOR THE CONVEYANCE. PRINTING AND STATIONARY EXPENSES ARE NOT PROPERLY M AINTAINED. THE ASSESSEE FURTHER ADMITTED THAT CLOSING STOCK WAS MAINTAINED ONLY ON ESTIMATION BASIS. IN VIEW OF THESE DEFECTS AND ASSESSEES ADMISSION, THE AO REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSEE HAD DISCLO SED NET PROFIT RATE OF 5.19%. AS THE BOOKS OF ACCOUNT WERE REJECTED, THE A O ESTIMATED NET PROFIT RATE AT 8% ON TOTAL CONTRACT RECEIPTS AND MADE ADDI TION OF RS. 9,35,532/-. 2.2 AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL WHEREIN THE LD. CIT(A) REFERRED TO THE ITAT JUDGMENT IN ASSESSEE'S CASE WH ICH HAS ADOPTED THE NET PROFIT RATE AT 6% SUBJECT TO CLAIM OF INTEREST AND DEPRECIATION IN ASSESSMENT YEAR 2005-06. IN ASSESSMENT YEAR 2006-07, THE ITAT APPLIED THE NET PROFIT RATE OF 5% SUBJECT TO CLAIM OF DEPRECIATION. THUS T HE LD. CIT(A) DELETED THE ADDITION BY FOLLOWING OBSERVATIONS. ITA NO. 552/JP/2012 THE ACIT VS. OM PRAKASH K EDIA, JAIPUR 3 THERE IS NO MATERIAL CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE YEAR UNDER REFERENCE. THE NET PROFIT RATE OF 5.19% DECLARED BY THE APPELLANT IN THE CURRENT YEAR WAS BETTER AS COMPARED TO NET PROFIT RATE OF 5% CONFIRMED BY I TAT IN ASSESSMENT YEAR 2006-07. FURTHER THE ASSESSEE HAD C LAIMED INTEREST OF RS. 2,76,743/- AND DEPRECIATION OF RS. 49,617/-.THE NET PROFIT RATE WITHOUT CONSIDERING INTEREST AND DE PRECIATION WAS 6.02% WHICH WAS EVEN BETTER AS COMPARED TO NET PROFIT RATE OF 6% CONFIRMED BY ITAT IN ASSESSMENT YEAR 200 5-06. THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF SHRI R AM JHANWAR LAL VS. ITO (17 TAXMAN 135) HAS HELD THAT RATE PRESCRIBED U/S 44AD CANNOT BE APPLIED WHERE RECEIPT S EXCEED RS. 40 LAKHS. ACCORDINGLY, I DIRECT THE AO TO DELET E THE ADDITION OF RS. 9,34,532/- MADE BY HER. THIS GROUND OF APPEA L IS ALLOWED. 2.3 AGGRIEVED, THE REVENUE IS BEFORE US. 2.4 THE LD. DR CONTENDS THAT THE ASSESSEE HAS NOT M AINTAINED PROPER RECORDS OF THE EXPENSES INCURRED IN THE BUSINESS AN D THE AO WAS UNABLE TO COMPUTE THE TAXABLE PROFITS OF THE ASSESSEE PROPERL Y AND THIS DEFECT HAS BEEN ACCEPTED BY THE ASSESSEE. SIMILARLY REJECTION OF BO OKS OF ACCOUNT HAS NOT BEEN CHALLENGED BY THE ASSESSEE. BEFORE THE LD. CIT (A), NO ADDITIONAL EVIDENCE IS PRODUCED TO BETTER THE ASSESSEE'S CASE AS PROJECTED BEFORE THE AO. THE NET PROFIT RATE OF CONTRACTOR VARIES FROM YEAR TO YEAR AND IT IS NOT AT STATIC FIGURE. THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF SHRI RAM JHANWAR LAL VS. ITO (177 TAXMAN 135) HAS HELD THAT RATE PRESCRIBED U/S 44AD CANNOT BE APPLIED WHERE GROSS RECEIPTS EXCEED RS. 40 LACS. HOWEVER, THE NET PROFIT RATE OF 6.02% WITHOUT CONSIDERING TH E INTEREST AND DEPRECIATION ITA NO. 552/JP/2012 THE ACIT VS. OM PRAKASH K EDIA, JAIPUR 4 WAS HELD TO BE REASONABLE OF THE ASSESSEE. THE LD. DR EMPHASIZED THAT FROM THE EARLIER ITAT ORDERS IT DOES NOT EMERGE THAT THE ASSESSEE WITHOUT QUESTION ACCEPTED THESE DEFECTS. BESIDES ABSENCE OF CHECK OV ER THE COSTLY MATERIALS LIKE CEMENT AND STEEL IS IMPROBABLE AS THE SITE SUP ERVISOR AND GODOWN KEEPER HAS TO MAINTAIN THE RECORD. THIS DISCREPANCY HAS BE EN ADMITTED BY THE ASSESSEE AND NOT DENIED BEFORE THE LD. CIT(A) ALSO; THESE FACTS CONSTITUTE A DISTINCTION BETWEEN EARLIER YEARS FACTS. IN VIEW OF THESE DISTINCT FEATURES INTERFERENCE IN NET PROFIT RATE BY AO IS JUSTIFIED AND THEY DEMONSTRATE THAT REASONABLE ESTIMATION OF NP WAS CALLED FOR. THE LD. CIT(A) DELETED THE ENTIRE ADDITION WITHOUT APPRECIATING THESE DISTINCT IONS AND ACCEPTED THE NP. 2.5 THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER H ANDS CONTENDS THAT ASSESSEE'S NET PROFIT RATE PROJECTION IS BETTER THA N EARLIER YEARS. THERE IS NO LAW THAT IN CASE OF REJECTION OF BOOKS OF ACCOUNT, THE HIGHER ESTIMATION IS INEVITABLE. 2.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT HAS NOT BEEN DISPUTED BY TH E ASSESSEE THAT MISTAKES IN BOOKS OF ACCOUNT WERE AGREED BY THE ASSESSEE. THUS REJECTION OF BOOKS OF ACCOUNT AND DISCREPANCIES HAS NOT BEEN CHALLENGED B Y THE ASSESSEE. A BETTER NET PROFIT RATE CAN NOT ABSOLVE THE ASSESSEE FROM Q UANTIFICATION OF DEFECTS WHICH HAVE BEEN ADMITTED. THERE IS NO RECORD ON ISS UANCE OF CEMENT AND ITA NO. 552/JP/2012 THE ACIT VS. OM PRAKASH K EDIA, JAIPUR 5 STEEL BESIDES SITE WISE STOCK REGISTER IS ADMITTED TO BE NOT MAINTAINED. IN OUR CONSIDERED VIEW, THE LD. CIT(A) SHOULD HAVE TAKEN INTO CONSIDERATION THE FACT OF ADMISSION OF DISCREPANCIES WHILE DECIDING T HE APPEAL. HON'BLE RAJASTHAN HIGH COURT IN THE CASE SHRI RAM JHANWAR L AL VS. ITO (SUPRA) HAS HELD THAT 8% NET PROFIT RATE CANNOT BE APPLIED AS I TS EQUAL TO PRESUMPTIVE RATE U/S 44AD. THUS IN THE ENTIRETY OF PECULIAR FACTS AN D CIRCUMSTANCES AND TO MEET THE ENDS OF JUSTICE, WE ARE OF THE VIEW THAT N ET PROFIT RATE OF 7% MAY APPLIED IN PLACE OF 5.19% AS HELD BY LD. CIT(A). TH E AO WILL RE COMPUTE THE TAXABLE PROFITS ACCORDINGLY. 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 12- 12-2014 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 12 TH DEC. 2014 *MISHRA COPY FORWARDED TO:- 1.THE ACIT, CIRCLE- 4, JAIPUR 2. SHRI OM PRAKASH KEDIA, JAIPUR BY ORDER 3. THE LD. CIT(A) 4. THE LD. CIT 5..THE LD. DR 6.THE GUARD FILE (IT NO. 552/JP/2012) AR ITAT,J AIPUR