M/S HANUMAN TUBE WELL CO., Jaipur V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3, Jaipur

ITA 556/JPR/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0499 (ITAT-JAIPUR)
• Duration Of Justice: 5 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-07-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 02-07-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Gift; Depreciation
• Section: 142(1); 44AB; 145(3)

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Jh laanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 556/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2012-13 M/s. Hanuman Tubewell Co. Station Road, Jaipur cuke Vs. The ACIT Circle-3, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABFH 5769 C vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.L. Jain, Advocate & Shri Ashok Kumar Gupta, Advocate jktLo dh vksj ls@ Revenue by: Smt. Runi Pal, Addl. CIT lquokbZ dh rkjh[k@ Date of Hearing : 21/07/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 18/10/2022 vkns'k@ ORDER PER: SANDEEP GOSAIN, JM The assessee has filed an appeal against the order of the ld.CIT(A)-1, Jaipur dated 25-04-2017 for the assessment year 2012-13 raising therein following grounds of appeal. ‘’1. That the ld. Authorities below have grossly erred both in law and facts in not accepting the income shown by the assessee as per regular books of accounts properly maintained during the course of business and such books are properly audited by CA as per provision of section 44AB. Thus, invoking of provisions of Section 145(3) is without any evidence/ material on record. 2 ITA NO. 556/JP/2017 HANUMAN TUBEWELL COMPANY VS ACIT, CIRCLE-3, JAIPUR 2. That the ld. Authorities below have grossly erred both in law and facts in applying NP Rate 8% subject to depreciation, remuneration and interest to partners as against NP rate of 7.5% shown by the assessee. Comparative Chart A.Y. Sales Net Profit % of NP AO applied CIT confirmed ITAT 2007-08 12,71,26,431 98,90,909 7.78 10% 8% Deptt. Appeal dismissed. 2008-09 15,42,73,432 1,20,32,775 7.80 8% 7.80% No appeal by Revenue 2009-10 19,30,68,206 1,30,24,394 6.75 8% Appeal pending - 2010-11 28,56,46,855 3,30,10,934 11.56 11.75% Appeal pending - 2011-12 29,30,40,106 2,38,38,649 8.14 Adh. Addit.6Lk Appeal pending - 2012-13 24,77,34,942 1,97,48,546 7.97 8% - - 3. That the ld. Authorities below have grossly erred both in law and facts in confirming interest of FDR Rs.10,76,160/- and on IT refund Rs.1,01,527/- as income from other sources whereas such interest income is incidental to business and that too directly relating to the business of contract. 4. That the ld. Authorities below have grossly erred both in law and facts in withdrawing interest u/s 234D amounting to Rs.21,749/-‘’ 2.1 Apropos Ground No 1 of the assessee, the facts as emerges from the order of the ld. CIT(A) are as under:- ‘’3.1.1. Determination (1) The brief facts of the case are that the appellant firm was engaged in the business of drilling of tubewell and trading of pumps and for the year under consideration, it filed its return of income on 29-09-2012 declaring total income at Rs.45,170/-. It has declared net profit of Rs.29,03,831/- on total turnover of Rs.24,77,34,942/- giving a NP Rate of 1.17%. The AO has rejected the books of accounts of the appellant u/s 145(3) of the Act as the appellant has not maintained day to day stock register and wages register, most of the payments were made in cash for purchase of raw material like gift, sand etc. quantitative details were not maintained, basis of closing stock was not submitted and site details of expenses were not produced. After rejecting the books of accounts of the appellant u/s 145(3) of the Act, the AO has applied the NP Rate of 8% to 3 ITA NO. 556/JP/2017 HANUMAN TUBEWELL COMPANY VS ACIT, CIRCLE-3, JAIPUR the gross receipt of Rs.24,78,46,633/- and determination of net profit at Rs.1,98,27,731/- subject to allowability of depreciation, remuneration and interest to partners and finally determined the total income at Rs.13,02,040/-. (ii) During the appellate proceedings, the case was first fixed for hearing for 22-06-2016 which was adjourned to 08-07-2016, 25-07-2016, 28-08-2016, 5-10-2016. The case was again fixed for hearing for 25-01- 2017 and adjourned to 14-02-2017, 10-03-2017 and 17-04-2017. Thus, it is evident that a number of opportunities were provided to the appellant during the appellate proceedings but except seeking adjournment, not even a single paper was filed by the appellant. On 17-04-2017, the AR of the appellant attended the proceedings, however, again no written submission were made and the case was discussed with him. As the appellant failed to controvert the findings recorded by the AO in the assessment order for rejection of books of accounts, I do not find any reason to interfere with the findings of the AO and thus it is held that the AO was justified in rejecting the books of accounts of the appellant u/s 145(3) of the Act. Hence, this ground of appeal is hereby rejected.’’ 2.2 During the course of hearing, the ld. AR of the assessee prayed that the lower authorities have erred in not accepting the income shown by the assessee. The Books of Accounts of the assessee are properly maintained by the assessee during the course of business and such books are properly audited by the CA as per provisions of Section 44AB of the Act. 2.3 On the other hand, the ld. DR supported the orders of the ld. CIT(A) 2.4 We have heard both the parties and perused the materials available on record. Brief facts of the case are that the assessee firm is engaged in the business of drilling of tubewell and trading of pumps. The assessee e-filed the return of income on 29-09-2012 declaring total income at Rs.45,170/-. The case of assessee was selected for scrutiny under CASS. Notice issued u/s 143(2) & 142(1) of the Act alongwith questionnaire were issued on 5-11-2014 which were complied with by the counsel of the assessee and books of accounts, bills, vouchers produced were examined by the AO on test check basis. During the year under consideration, the assessee has declared net profit at Rs.29,03,831/- on total turnover of Rs.24,77,34,942/- giving a N.P. 4 ITA NO. 556/JP/2017 HANUMAN TUBEWELL COMPANY VS ACIT, CIRCLE-3, JAIPUR Rate of 0.02% which is lower in comparison to NP rate in preceding assessment years. During the course of assessment proceedings, the AO noted various discrepancies the books of accounts of the assessee like (1) the assessee has not maintained day to day stock registere (2) No labour / wages registers were maintained (3) Most of the payment of labour and other expenses were not verifiable (4) Partywise details of purchases were not produced for verification (5) No basis of closing stock were produced etc. etc. The AO thus noted various defects which are elaborately mentioned in the assessment order for which show cause notice was issued by the AO asking the assessee as to why the books of accounts should not be rejected by invoking the provisions of Section 145(3). The reply of the assessee was considered by the AO but the reasons given by the assessee as to the defects mentioned in the assessment order were not found satisfactory by the AO who rejected the books of account of the assessee by invoking the provisions of Section 145(3) of the Act. In first appeal, the ld. CIT(A) has confirmed the action of the AO. However, neither any controverting arguments against the order of the ld. CIT(A) was advanced by the ld. AR of the assessee nor any written submission has been filed. Hence, in this situation, we have no other alternative except to confirm the action of the ld. CIT(A). Thus Ground No. 1 of the assessee is dismissed. 3.1 Apropos Ground No 2 of the assessee, the facts as emerges from the order of the ld. CIT(A) are as under:- ‘’3.2.1 Determination It is noted that the appellant has declared a net profit of Rs.1,97,48,546/- on total turnover of Rs.24,77,34,942/- giving a NP rate of 7.97% subject to allowance of depreciation, interest and remuneration to partners, against which the AO has applied NP Rate at 8%. It may be mentioned that for the AY 2010-11 and 2011- 12 on turnover of Rs. 28,56,46,855/- and Rs.29,30,40,106/-, the appellant has declared NP rate of 11.56% and 8.14% respectively subject to disallowance of depreciation, interest and remuneration to partners. It may be mentioned that it 5 ITA NO. 556/JP/2017 HANUMAN TUBEWELL COMPANY VS ACIT, CIRCLE-3, JAIPUR has been held that after rejecting the books of accounts, the past results of an assessee are the best guide for making estimation of income. It is seen that in the immediate two preceding assessment years as detailed above, the appellant has shown NP Rate of 11.56% and 8.14% respectively. In view of these facts, it is, therefore, held that the AO was justified in applying net profit rate of 8% to the total turnover of the appellant subject to allowance of depreciation, interest and remuneration to partners. Hence, this ground of appeal is hereby rejected.’’ 3.2 During the course of hearing, the ld. AR of the assessee prayed that the lower authorities have erred in confirming the N.P. Rate of 8% to the total turnover of the assessee subject to allowance of depreciation, interest and remuneration to partners. 3.3 On the other hand, the ld. DR supported the orders of the ld. CIT(A) 3.4 We have heard both the parties and perused the materials available on record. In this case the AO while making the assessment applied the Net profit Rate of 8% on the gross receipts of Rs.24,78,46,633/- subject to allowability of depreciation and remuneration and interest paid to partners. In first appeal, the ld. CIT(A) has confirmed the action of the AO holding that in the immediate two preceding assessment years the assessee has shown N.P. Rate of 11.56% and 8.14% respectively. The ld. CIT(A) has also taken into consideration the comparative chart of N.P. Rate of the assessee as under:- A.Y. Sales Net Profit % of NP AO applied CIT confirmed ITAT 2007-08 12,71,26,431 98,90,909 7.78 10% 8% Deptt. Appeal dismissed. 2008-09 15,42,73,432 1,20,32,775 7.80 8% 7.80% No appeal by Revenue 2009-10 19,30,68,206 1,30,24,394 6.75 8% Appeal pending - 2010-11 28,56,46,855 3,30,10,934 11.56 11.75% Appeal pending - 2011-12 29,30,40,106 2,38,38,649 8.14 Adh. Addit.6Lk Appeal pending - 2012-13 24,77,34,942 1,97,48,546 7.97 8% - - In this way, the ld. CIT(A) found that the AO is justified in applying net profit rate of 8% to the total turnover of the assessee subject to allowance of depreciation, interest and remuneration to 6 ITA NO. 556/JP/2017 HANUMAN TUBEWELL COMPANY VS ACIT, CIRCLE-3, JAIPUR partners for which neither any controverting arguments against the order of the ld. CIT(A) was advanced by the ld. AR of the assessee nor any written submission has been filed. Hence, in this situation, we have no other alternative except to confirm the action of the ld. CIT(A). Thus Ground No. 2 of the assessee is dismissed. 4.1 As regards the ground No. 3 of the assesse (supra), the Bench noted that this issue was not raised by the assessee before the ld. CIT(A). Hence, we do not see any justifiable reason to adjudicate upon this issue which is infructuous. 5.1 The ground No. 4 of the assessee is regarding withdrawing of interest u/s 234D of the Act amounting to Rs.21,749/- which is mandatory and consequential in nature. 4.0. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 18/10/2022 Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ½ ¼lanhi xkslkbZ½ (Rathod Kamlesh Jayantbhai) (Sandeep Gosain) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 18 /10/2022 *Mishra vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- M/s. Hanuman Tubewell Company, Jaipur 2. izR;FkhZ@ The Respondent- The ACIT, Circle-3, Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 556/JP/2017) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asstt. Registrar