M/s. Bharat Construction Company, JODHPUR V. ITO, CHURU

ITA 554/JODH/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91890 (ITAT-JODHPUR)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 05-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER [SMC] ITA NO. 554 / JU/ 20 1 4 [ ASSESSMENT YEAR 20 09 - 10] M/S BHARAT CONSTRUCTION COMPANY VS. THE I.T .O WARD NO. 04, NEAR NETJI THAN WARD - 1 SAD ULPUR, DISTRICT - CHURU CHURU PAN NO : AAFFB 1122R (APPELLANT) (RESPONDENT) A SSESSEE B Y : SHRI U.C. JAIN DEPARTMENT B Y : SHRI R.K. SHARDA DATE OF H EARING : 1 9 . 0 5 .201 5 DATE OF PRONOUNCEMENT : 22 . 0 5 . 201 5 ORDER TH IS IS AN APPEA L FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT (A) - III, JAIPUR, RAJASTHAN DATED 0 8 . 0 9 .20 1 4 FOR THE A.Y. 2009 - 10 IN THE MATTER OF ORDER U/S 143(3) OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT, FOR SHORT] . 2 2. THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS CASE RELATES TO THE APPLICATION OF N.P. RATE OF 8.5% INSTEAD OF N.P. RATE DISCLOSED BY THE ASSESSEE AT 5.66%. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. 4. FACTS IN BRIEF ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSI NESS OF CIVIL CONSTRUCTION AND DURING THE ASSESSMENT YEAR UNDER CONSIDERATION ON GROSS RECEIPTS OF RS. 1 , 05 , 98 , 915/ - , GROSS PROFIT WAS DECLARED AT RS. 8 , 78 , 410/ - WHICH GAVE GP RATE OF 8.29%. THE AO NOTED THAT THE ASSESSEE WAS NOT MAINTAINING STOCK REGISTER , DAY TO DAY MATERIAL CONSUMED AND WAGES / LABOUR REGISTER. AS PER AO, DUE TO SUCH DEFECT S THE TRADING RESULT DECLARED BY THE ASSESSEE DID NOT GIVE TRUE PICTURE OF BUSINESS AND , THEREFORE, THE AO APPLIED PROVISION S OF SEC. 145(3) OF THE ACT AND APPLIED N.P . RATE OF 8.5% SUBJECT TO DEPRECIATION AND INTEREST/REMUNERATION TO PARTNER. 5. BEFORE THE LD. CIT(A), THE ASSESSEE FILED CHART INDICATING G.P. RATE AND N.P. RATE DECLARED IN THE PRECEDING THREE YEARS WHEREIN G.P. OF 8.06% TO 8.29% WAS REFLECTED WHEREAS N .P, RATE 3 WAS VARYING FROM 4.06% TO 5.66%. AFTER OBSERVING THAT THE RETURNS FILED BY THE ASSESSEE FOR THE PRECEDING THREE YEARS WERE MERELY PROCESSED U/S 143(1) OF THE ACT AND NO SCRUTINY ASSESSMENT WAS MADE, THE LD. CIT(A) REJECTED THE ASSESSEES CONTENTI ON REGARDING G.P. RATE AND N.P. RATE DECLARED IN THE LAST THREE YEARS. HE CONFIRMED THE ACTION OF THE AO FOR APPLYING N.P. RATE OF 8.5%. 6. THE LD. A.R. SHRI U.C. JAIN APPEARED ON BEHALF OF THE ASSES S EE AND RELIED ON THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. IN ANI MARBLES P. LTD. R EPORTED IN 316 ITR 125 [RAJ] WHEREIN IT WAS HELD THAT EVEN AFTER REJECTION OF BOOKS OF ACCOUNT, THE TRIBUNAL WAS JUSTIFIED IN APPLYING G.P. RATE OF THE PREVIOUS YEAR. 7. ON THE OTHER HAND, THE LD. D.R. SHRI R.K. SHARDA CONTENDED THAT THE LD. CIT(A) WAS PERFECTLY JUSTIFIED IN NOT APPLYING N.P. RATE OF THE EARLIER YEAR IN SO FAR AS THERE WAS NO SCRUTINY ASSESSMENT IN THOSE YEARS. THEREFORE, THE BOOK RESULTS SHOWN BY THE ASSESSEE CANNOT BE ACCEPTED AN D APPLIED FOR THE 4 SUBSEQUENT YEAR WHEN THE BOOKS OF ACCOUNT HAVE BEEN REJECTED BY THE AO. 8. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS RE FERRED TO BY THE LD. AR BEFORE ME DURING THE COURSE OF HEARING. FROM THE RECORD, I FOUND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD GOT ITS ACCOUNTS AUDITED WHEREIN N.P. RATE WAS SHO WN AT 5.66%. FOR THE SIMILAR NATURE OF ACTIVITY, N.P. RATE AND G.P. RATE SHOWN BY THE ASSESSEE IN THE LAST THREE YEARS WAS SHOWN AS UNDER: ASSTT. YEAR TOTAL CONTRACT RECEIPT GROSS PROFIT PERCENTAGE 2007 - 2008 1,27,60,238/ - 10,28,800/ - 8.06% 2008 - 2009 83,35,360/ - 69,4,930/ - 8.33% 2009 - 2010 10,59,8,915/ - 87,8,410/ - 8.29% 5 AS PER BOOKS AND AUDIT REPORT THE NET PROFIT BEFORE THE INTEREST AND WORKING REMUNERATION PAID TO WORKING PARTNERS AND DEPRECIATION, THE NET PROFIT COMES AS UNDER : - ASSTT. YEAR TOTAL CONTRACT RECEIPT PROFIT PERCENTAGE 2007 - 2008 10,28,800/ - 51,8,517/ - 4.06% 2008 - 2009 83,35,360/ - 19,2,228/ - 2.30% 2009 - 2010 1,05,98,915/ - 6,00,439/ - 5.66% IT IS CLEAR FROM THE ABOVE CHART THAT THE TURNOVER OF THE A SSESSEE DURING THE YEAR UNDER CONSIDERATION HAS INCREASED BY RS. 22,63,555/ - LAKHS. THE N.P. RATE HAS ALSO INCREASED FROM 2.30% TO 5.66%. MERELY BY OBSERVING THAT THE ASSESSEE WAS NOT MAINTAINING DAY TO DAY STOCK REGISTER, MATERIAL CONSUMED REGISTER AND WAGES/LABOUR REGISTER, THE AO HAS REJECTED THE BOOKS OF ACCOUNT. IN MY CONSIDERED VIEW, THE BOOKS OF ACCOUNT SHOULD NOT BE REJECTED LIGHT - HEARTEDLY UNLESS THERE IS MATERIAL DEFECT IN THE BOOKS OF ACCOUNT SO AS TO INDICATE ANY UNACCOUNTED SALES/PURCHASES/E XPENSES. THE BOOKS OF ACCOUNT MAINTAINED IN THE REGULAR COURSE OF BUSINESS DULY AUDITED SHOULD NOT ALSO BE REJECTED MERELY ON THE PLEA THAT SOME OF THE 6 EXPENSES WERE NOT PROPERLY VOUCHED IN VIEW OF THE PECULIAR NATURE OF ASSESSEES BUSINESS. IN THE INSTA NT CASE, THE ASSESSEE IS ENGAGED IN THE CONSTRUCTION BUSINESS WHEREIN CAS H PAYMENTS TO LABOURERS IS INEVITABLE AS WELL AS SITE EXPENSES WHICH REQUIRE TO BE PAID IN CASH AND IN WHICH ONLY SELF - MADE VOUCHERS CAN BE MAINTAINED. HOWEVER, THE LOWER AUTHORITIES HAVE A L SO OVER LOOKED THE FACT THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD DECLARED SUBSTANTIALLY HIGHER N.P. RATE. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF INANI MARBLES P. LTD [SUPRA] HA S CATEGORICALLY OBSERVED THAT IN THE ABSEN CE OF ANY CHANGE IN THE FACTUAL POSITION, NORMALLY THE PROFIT RATE DECLARED AND ACCEPTED IN THE PRECEDING YEAR CONSTITUTES A GOOD BASIS FOR WORKING OUT THE GROSS PROFIT. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT DECISION AND APPLYING THE SAME TO THE FACTS OF THE INSTANT CASE, I DO NOT FIND ANY MERITS IN THE ACTION OF THE LOWER AUTHORITIES IN APPLYING N.P. RATE OF 8.5% IN PLACE OF 5.66% DECLARED BY THE ASSESSEE WHEN THE N.P. RATE DECLARED DURING THE YEAR AT 5.66% WAS SUB STA NTIALLY HIGHER THAN THE N.P. RATE OF 2.30% DECLARED IN THE IMMEDIATELY PRECEDING A.Y. 2008 - 09. ACCORDINGLY, KEEPING 7 IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND DIRECT THE AO TO APPLY N.P. RATE OF 5.66% DURING THE YEAR UNDER CONSIDERATION. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRON OUNCED IN THE COURT ON 21 - 0 5 - 201 5 . SD/ - ( R.C. SHARMA ) A CCOUNTANT MEMBER DATED : 21 ST MAY, 2015 . VL/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) BY ORDER 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR